A note on the stability of the New Keynesian Phillips Curve in Europe
AbstractThis note investigates how the explanatory power of the forward-looking New Keynesian Phillips Curve evolves over time. We exploit the present-value implications of the model and use VAR forecasts to assess whether the model matches the behaviour of actual inflation in the Euro area. A set of rolling regressions shows that the model's explanatory power varies substantially over the sample. Regime changes in the underlying monetary framework, i.e. realignment crises in the European Monetary System, the Maastricht treaty and, eventually, the introduction of European Monetary Union, are reflected in a deterioration of the model's explanatory power.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 17 (2010)
Issue (Month): 3 ()
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- Jaromir Baxa & Miroslav Plasil & Borek Vasicek, 2012. "Changes in Inflation Dynamics under Inflation Targeting? Evidence from Central European Countries," Working Papers 2012/04, Czech National Bank, Research Department.
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