Identification-Robust Minimum Distance Estimation of the New Keynesian Phillips Curve
AbstractLimited-information identification-robust methods on the indexation and price rigidity parameters of the New Keynesian Phillips Curve yield very wide confidence intervals. Full-information methods impose more restrictions on the reduced-form dynamics and thus make more efficient use of the information in the data. However, such methods are also subject to weak instrument problems. We propose identification-robust minimum distance methods for exploiting these additional restrictions and show that they yield considerably smaller confidence intervals for the coefficients of the model compared to their limited-information generalized method of moments counterparts. In contrast to previous studies, we find evidence of partial but not full indexation, and obtain sharper inference on the degree of price stickiness. However, this parameter remains weakly identified. Copyright (c) 2010 The Ohio State University.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 42 (2010)
Issue (Month): 2-3 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Leandro M. Magnusson & Sophocles Mavroeidis, 2009. "Identification-Robust Minimum Distance Estimation of the New Keynesian Phillips Curve," Working Papers 0904, Tulane University, Department of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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- Hyeongwoo Kim & Masao Ogaki, 2011.
"Purchasing Power Parity and the Taylor Rule,"
Auburn Economics Working Paper Series
auwp2011-02, Department of Economics, Auburn University.
- Hyeongwoo Kim & Ippei Fujiwara & Bruce E. Hansen & Masao Ogaki, 2013. "Purchasing Power Parity and the Taylor Rule," CAMA Working Papers 2013-41, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Masao Ogaki & Hyeongwoo Kim, 2009. "Purchasing Power Parity and the Taylor Rule," Working Papers 09-03, Ohio State University, Department of Economics.
- Antonio Diez de los Rios, 2013. "A New Linear Estimator for Gaussian Dynamic Term Structure Models," Working Papers 13-10, Bank of Canada.
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