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Autoregression-based estimation of the new Keynesian Phillips curve

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  • Lanne, Markku
  • Luoto, Jani

Abstract

We propose an estimation method of the new Keynesian Phillips curve (NKPC) based on a univariate noncausal autoregressive model for the inflation rate. By construction, our approach avoids a number of problems related to the GMM estimation of the NKPC. We estimate the hybrid NKPC with quarterly U.S. data (1955:1–2010:3), and both expected future inflation and lagged inflation are found important in determining the inflation rate, with the former clearly dominating. Moreover, inflation persistence turns out to be intrinsic rather than inherited from a persistent driving process.

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Bibliographic Info

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

Volume (Year): 37 (2013)
Issue (Month): 3 ()
Pages: 561-570

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Handle: RePEc:eee:dyncon:v:37:y:2013:i:3:p:561-570

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Noncausal time series; Non-Gaussian time series; Inflation; Phillips curve;

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References

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  1. Jordi Galí & Mark Gertler & David López-Salido, 2005. "Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve," Banco de Espa�a Working Papers 0520, Banco de Espa�a.
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  8. Jeremy Rudd & Karl Whelan, 2001. "New tests of the New-Keynesian Phillips curve," Finance and Economics Discussion Series 2001-30, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Nyberg , Henri & Saikkonen, Pentti, 2012. "Forecasting with a noncausal VAR model," Research Discussion Papers 33/2012, Bank of Finland.

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