This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
George S. Tavlas () (Bank of Greece, Economic Research Department)
P.A.V.B. Swamy (US Bureau of Labour Statistics)

Additional information is available for the following registered author(s):

Abstract

A theoretical analysis of the new Keynesian Phillips curve (NKPC) is provided, formulating the conditions under which the NKPC coincides with a real-world relation that is not spurious or misspecified. A time-varying-coefficient (TVC) model, involving only observed variables, is shown to exactly represent the underlying “true” NKPC under certain conditions. In contrast, “hybrid” NKPC models, which add lagged-inflation and supply-shock variables, are shown to be spurious and misspecified. We also show how to empirically implement the NKPC under the assumption that expectations are formed rationally.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.bankofgreece.gr/BogEkdoseis/Paper200634.pdf
File Format: application/pdf
File Function: Full Text
Download Restriction: no

Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 34.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 24 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:bog:wpaper:34

Contact details of provider:
Web page: http://www.bankofgreece.gr
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Christina Tsochatzi).

Related research
Keywords: Time-varying-coefficient model; Inflation-unemployment trade-off; “Objective” probability; Spurious correlation; Rational expectation; Coefficient driver;

Other versions of this item:

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

This paper has been announced in the following NEP Reports:

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.:
  1. Dimitrios Sideris & Nicholas G. Zonzilos, 2005. "The Greek Model of the European System of Central Banks Multi-Country Model," Working Papers 20, Bank of Greece. [Downloadable!]
  2. Panayiotis P. Athanasoglou & Sophocles N. Brissimis & Matthaios D. Delis, 2005. "Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability," Working Papers 25, Bank of Greece. [Downloadable!]
    Other versions:
  3. Theodoros S. Papaspyrou, 2004. "EMU Strategies: Lessons from Past Experience in View of EU Enlargement," Working Papers 11, Bank of Greece. [Downloadable!]
  4. Harris Dellas & George Tavlas, 2004. "Wage Rigidity and Monetary Union," Working Papers 12, Bank of Greece. [Downloadable!]
    Other versions:
  5. P. Swamy & George Tavlas, 2005. "Theoretical conditions under which monetary policies are effective and practical obstacles to their verification," Economic Theory, Springer, vol. 25(4), pages 999-1005, 06. [Downloadable!] (restricted)
  6. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December. [Downloadable!] (restricted)
    Other versions:
  7. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Harvard Institute of Economic Research Working Papers 1963, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  8. Thanasis N. Christodoulopoulos & Ioulia Grigoratou, 2005. "Measuring Liquidity in the Greek Government Securities Market," Working Papers 23, Bank of Greece. [Downloadable!]
  9. Basmann, R. L., 1988. "Causality tests and observationally equivalent representations of econometric models," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 69-104. [Downloadable!] (restricted)
  10. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages C45-61, May. [Downloadable!] (restricted)
    Other versions:
  11. Eleni Angelopoulou, 2005. "The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK," Working Papers 27, Bank of Greece. [Downloadable!]
  12. George A. Christodoulakis, 2005. "The European Union GDP Forecast Rationality under Asymmetric Preferences," Working Papers 30, Bank of Greece. [Downloadable!]
  13. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-2), pages 297-346. [Downloadable!]
  14. Dimitrios Sideris, 2004. "Testing for Long-Run PPP in a System Context: Evidence for the US, Germany and Japan," Working Papers 19, Bank of Greece. [Downloadable!]
  15. Sophocles N. Brissimis & Theodora S. Kosma, 2005. "Market Power, Innovative Activity and Exchange Rate Pass-Through," Working Papers 22, Bank of Greece. [Downloadable!]
  16. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  17. George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas & Michael Ulan, 2005. "Some Further Evidence on Exchange-Rate Volatility and Exports," Working Papers 28, Bank of Greece. [Downloadable!]
    Other versions:
  18. George Stubos & Ioannis Tsikripis, 2005. "Regional Integration Challenges in South East Europe: Banking Sector Trends," Working Papers 24, Bank of Greece. [Downloadable!]
  19. George Hondroyiannis & Sophia Lazaretou, 2004. "Inflation persistence during periods of structural change - an assessment using Greek data," Working Paper Series 370, European Central Bank. [Downloadable!]
    Other versions:
  20. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece. [Downloadable!]
  21. Nicholas G. Zonzilos, 2004. "Econometric Modelling at the Bank of Greece," Working Papers 14, Bank of Greece. [Downloadable!]
  22. Zellner, Arnold, 1979. "Causality and econometrics," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 9-54, January. [Downloadable!] (restricted)
  23. Dellas, Harris & Tavlas, George, 2005. "The global implications of regional exchange rate regimes," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 243-255, March. [Downloadable!] (restricted)
    Other versions:
  24. Sophocles N. Brissimis & Dimitris A. Sideris & Fragiska K. Voumvaki, 2004. "Testing Long-Run Purchasing Power Parity under Exchange Rate Targeting," Working Papers 15, Bank of Greece. [Downloadable!]
    Other versions:
  25. Zellner, A., 1988. "Causality And Causal Laws In Economics," Papers m8801, Southern California - Department of Economics.
    Other versions:
  26. Swamy, P.A.V.B. & Tavlas, George S., 2006. "A Note On Muth'S Rational Expectations Hypothesis: A Time-Varying Coefficient Interpretation," Macroeconomic Dynamics, Cambridge University Press, vol. 10(03), pages 415-425, June. [Downloadable!]
  27. Panayotis Kapopoulos & Sophia Lazaretou, 2005. "Does Corporate Ownership Structure Matter for Economic Growth? A Cross-Country Analysis," Working Papers 21, Bank of Greece. [Downloadable!]
    Other versions:
  28. I-Lok Chang & P.A.V.B. Swamy & Charles Hallahan & George S. Tavlas, 2000. "A Computational Approach to Finding Causal Economic Laws," Computational Economics, Springer, vol. 16(1/2), pages 105-136, October. [Downloadable!]
  29. Sophia Lazaretou, 2004. "The Drachma, Foreign Creditors and the International Monetary System: Tales of a Currency during the 19th and the Early 20th Century," Working Papers 16, Bank of Greece. [Downloadable!]
  30. Pratt, John W. & Schlaifer, Robert, 1988. "On the interpretation and observation of laws," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 23-52. [Downloadable!] (restricted)
  31. Stephen G. Hall & George Hondroyiannis, 2006. "Measuring the Correlation of Shocks betweem the EU15 and the New Member Countries," Working Papers 31, Bank of Greece. [Downloadable!]
    Other versions:
  32. Christos Papazoglou, 2005. "Real Exchange Rate Dynamics and Output Contraction under Transition," Working Papers 29, Bank of Greece. [Downloadable!]
  33. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  34. Yiannis Stournaras, 2005. "Aggregate Supply and Demand, the Real Exchange Rate and Oil Price Denomination," Working Papers 26, Bank of Greece. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Stephen G Hall & George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas, 2008. "A Portfolio Balance Approach to Euro-Area Money Demand in a Time-Varying Environment," Discussion Papers in Economics 08/9, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  2. George S. Tavlas, 2008. "The Benefits and Costs of Monetary Union in Southern Africa: A Critical Survey of the Literature," Working Papers 70, Bank of Greece. [Downloadable!]
    Other versions:
  3. George Hondroyiannis & P.A.V.B. Swamy & George Tavlas & Michael Ulan, 2008. "Some Further Evidence on Exchange-Rate Volatility and Exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 151-180, April. [Downloadable!] (restricted)
    Other versions:
  4. George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas, 2007. "The New Keynesian Phillips Curve and Lagged Inflation: A Case of Spurious Correlation?," Working Papers 57, Bank of Greece. [Downloadable!]
    Other versions:
  5. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 41, Bank of Greece. [Downloadable!]
    Other versions:
  6. Richard N. Cooper & Michael Bordo & Harold James, 2006. "What About a World Currency? Proposal for a Common Currency among Rich Democracies. One World Money, Then and Now," Working Papers 44, Bank of Greece. [Downloadable!]
  7. Andreas S. Andreou & George A. Zombanakis, 2006. "Computational Intelligence in Exchange-Rate Forecasting," Working Papers 49, Bank of Greece. [Downloadable!]
  8. Sven W. Arndt, 2006. "Regional Currency Arrangements in North America," Working Papers 40, Bank of Greece. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? Springer Verlag was the first commercial publisher to be listed on RePEc.

This page was last updated on 2009-11-12.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.