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On the precision of Calvo parameter estimates in structural NKPC models

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  • Dufour, Jean-Marie
  • Khalaf, Lynda
  • Kichian, Maral

Abstract

We study the extent of empirical information that can be obtained from alternative structural New Keynesian inflation equations concerning the average duration of prices in the United States, given that such specifications may be hard to identify. Using four different indexation and real-wage-rigidity-based models, in conjunction with identification-robust econometric methods, we evaluate the precision of Calvo parameter estimates. While results are sensitive to calibration and instrument selection, we find confidence bounds on the average duration of prices that line up with available micro-founded studies, statistically significant coefficients for the forcing variables, and non-zero estimates on the coefficient of lagged inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 9 (September)
Pages: 1582-1595

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:9:p:1582-1595

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Keywords: Sticky-price Calvo model Structural estimation Weak identification Indexation Real wage;

References

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Cited by:
  1. Luger, Richard, 2012. "Finite-sample bootstrap inference in GARCH models with heavy-tailed innovations," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3198-3211.
  2. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2013. "Identification-robust analysis of DSGE and structural macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 340-350.
  3. Gbaguidi, David Sedo, 2011. "Expectations Impact on the Effectiveness of the Inflation-Real Activity Trade-Off," MPRA Paper 35482, University Library of Munich, Germany.
  4. Gbaguidi, David Sedo, 2011. "Regime Switching in a New Keynesian Phillips Curve with Non-zero Steady-state Inflation Rate," MPRA Paper 35481, University Library of Munich, Germany.

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