Advanced Search
MyIDEAS: Login

Interpreting the evidence for New Keynesian models of inflation dynamics

Contents:

Author Info

  • Nymoen, Ragnar
  • Swensen, Anders Rygh
  • Tveter, Eivind

Abstract

We present a framework for interpretation of the empirical results of New Keynesian models of inflation dynamics. Both the rational expectations solution of the structural New Keynesian Phillips curve, NKPC, and the reduced form VAR analysis of the multivariate time series properties give insight about the joint implications of the evidence in the NKPC literature. For example, we show that the unit-root form of non-stationary may be implied for inflation even though the econometric model initially assumed stationarity. The uniqueness and form of a rational expectations solution may depend on whether dynamic (in)homogeneity is present, and on the size of the forward-coefficient in the NKPC.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0164070412000250
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 2 ()
Pages: 253-263

as in new window
Handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:253-263

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: New Keynesian Phillips curve; Forward-looking price setting; Rational expectations; VAR model;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  2. Olivier Blanchard & Jordi Galí, 2005. "Real Wage Rigidities and the New Keynesian Model," Working Papers 243, Barcelona Graduate School of Economics.
  3. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
  4. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
  5. Neil R. Ericsson & David F. Hendry, 1989. "Encompassing and rational expectations: how sequential corroboration can imply refutation," International Finance Discussion Papers 354, Board of Governors of the Federal Reserve System (U.S.).
  6. Russell, Bill, 2011. "Non-stationary inflation and panel estimates of United States short and long-run Phillips curves," Journal of Macroeconomics, Elsevier, vol. 33(3), pages 406-419, September.
  7. Jeffrey C. Fuhrer, 2006. "Intrinsic and Inherited Inflation Persistence," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  8. Bill Russell & Anindya Banerjee & Issam Malki & Natalia Ponomareva, 2010. "A Multiple Break Panel Approach to Estimating United States Phillips Curves," Discussion Papers 10-14, Department of Economics, University of Birmingham.
  9. Jeremy Rudd & Karl Whelan, 2003. "Can rational expectations sticky-price models explain inflation dynamics?," Finance and Economics Discussion Series 2003-46, Board of Governors of the Federal Reserve System (U.S.).
  10. Fabrizio Mattesini & Lorenza Rossi, 2008. "Productivity Shocks And Optimal Monetary Policy In A Unionized Labor Market Economy," Manchester School, University of Manchester, vol. 76(5), pages 578-611, 09.
  11. Luca Fanelli & Giulio Palomba, 2011. "Simulation‐based tests of forward‐looking models under VAR learning dynamics," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(5), pages 762-782, 08.
  12. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  13. Rudd, Jeremy & Whelan, Karl, 2005. "Modelling Inflation Dynamics: A Critical Review of Recent Research," Research Technical Papers 7/RT/05, Central Bank of Ireland.
  14. John H. Cochrane, 2007. "Determinacy and Identification with Taylor Rules," NBER Working Papers 13409, National Bureau of Economic Research, Inc.
  15. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  16. Luca Fanelli, 2006. "Testing the New Keynesian Phillips Curve through Vector Autoregressive models : Results from the Euro area," Quaderni di Dipartimento 0, Department of Statistics, University of Bologna.
  17. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
  18. Gunnar B�rdsen & Ragnar Nymoen, 2003. "Testing Steady-State Implications for the NAIRU," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1070-1075, November.
  19. Kurmann, Andre, 2007. "VAR-based estimation of Euler equations with an application to New Keynesian pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 767-796, March.
  20. repec:nbr:nberre:0126 is not listed on IDEAS
  21. Nymoen, Ragnar & L. Castle, Jennifer & A. Doornik, Jurgen & F. Hendry, David, 2010. "Testing the Invariance of Expectations Models of Inflation," Memorandum 21/2010, Oslo University, Department of Economics.
  22. Sbordone, Argia, 1998. "Prices and Unit Labor Costs: A New Test of Price Stickiness," Seminar Papers 653, Stockholm University, Institute for International Economic Studies.
  23. Kleibergen, Frank & Mavroeidis, Sophocles, 2009. "Weak Instrument Robust Tests in GMM and the New Keynesian Phillips Curve," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(3), pages 293-311.
  24. Jordi Gali & Mark Gertler & David Lopez-Salido, 2005. "Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve," NBER Working Papers 11788, National Bureau of Economic Research, Inc.
  25. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2001. "European Inflation Dynamics," NBER Working Papers 8218, National Bureau of Economic Research, Inc.
  26. Sophocles Mavroeidis, 2006. "Testing the New Keynesian Phillips Curve Without Assuming Identification," Working Papers 2006-13, Brown University, Department of Economics.
  27. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2004. "Econometric Evaluation of the New Keynesian Phillips Curve," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 671-686, 09.
  28. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  29. Mavroeidis, Sophocles, 2005. "Identification Issues in Forward-Looking Models Estimated by GMM, with an Application to the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 421-48, June.
  30. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  31. Boug, Pål & Cappelen, Adne & Swensen, Anders Rygh, 2010. "The new Keynesian Phillips curve revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 858-874, May.
  32. Sargan, J D, 1980. "A Model of Wage-Price Inflation," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 97-112, January.
  33. Timothy Cogley & Argia M. Sbordone, 2008. "Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve," American Economic Review, American Economic Association, vol. 98(5), pages 2101-26, December.
  34. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  35. Johansen, Soren & Swensen, Anders Rygh, 1999. "Testing exact rational expectations in cointegrated vector autoregressive models," Journal of Econometrics, Elsevier, vol. 93(1), pages 73-91, November.
  36. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
  37. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  38. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  39. Rossi, Lorenza & Mattesini, Fabrizio, 2007. "Productivity Shock and Optimal Monetary Policy in a Unionized Labor Market. Forthcoming: The Manchester School," MPRA Paper 8414, University Library of Munich, Germany, revised 2008.
  40. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework
    [Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Ke
    ," Introductory Chapters, Princeton University Press.
  41. Bjørnstad, Roger & Nymoen, Ragnar, 2008. "The New Keynesian Phillips curve tested on OECD panel data," Economics Discussion Papers 2008-4, Kiel Institute for the World Economy.
  42. Mikael Juselius, 2011. "Testing Steady‐State Restrictions of Linear Rational Expectations Models when Data are Highly Persistent," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(3), pages 315-334, 06.
  43. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, . "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Working Paper 84656, Harvard University OpenScholar.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:253-263. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.