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Interpreting the evidence for New Keynesian models of inflation dynamics

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  • 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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

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

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:253-263

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Web page: http://www.elsevier.com/locate/inca/622617

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

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Cited by:
  1. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 124-88, March.

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