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Testing the New Keynesian Phillips Curve Without Assuming Identification

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Abstract

We re-examine the evidence on the new Phillips curve model of Gali and Gertler (Journal of Monetary Economics 1999) using the conditional score test of Kleibergen (Econometrica 2005), which is robust to weak identification. In contrast to earlier studies, we find that US postwar data are consistent both with the view that inflation dynamics are forward-looking, and with the opposite view that they are predominantly backward-looking. Moreover, the labor share does not appear to be a relevant determinant of inflation. We show that this is an important factor contributing to the weak identification of the Phillips curve.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2006-13.

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Date of creation: 2006
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Handle: RePEc:bro:econwp:2006-13

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Postal: Department of Economics, Brown University, Providence, RI 02912

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Citations

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Cited by:
  1. Rolf Scheufele, 2008. "Evaluating the German (New Keynesian) Phillips Curve," IWH Discussion Papers, Halle Institute for Economic Research 10, Halle Institute for Economic Research.
  2. Andreas Beyer & Roger E. A. Farmer & Jér�me Henry & Massimiliano Marcellino, 2008. "Factor analysis in a model with rational expectations," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 11(2), pages 271-286, 07.
  3. Nymoen, Ragnar & Swensen, Anders Rygh & Tveter, Eivind, 2012. "Interpreting the evidence for New Keynesian models of inflation dynamics," Journal of Macroeconomics, Elsevier, Elsevier, vol. 34(2), pages 253-263.
  4. Hashmat Khan & Charlotta Groth, 2007. "Investment Adjustment Costs: An Empirical Assessment," Carleton Economic Papers, Carleton University, Department of Economics 07-08, Carleton University, Department of Economics, revised Dec 2010.
  5. Pål Boug & Ådne Cappelen & Anders Rygh Swensen, 2007. "The New Keynesian Phillips Curve revisited," Discussion Papers, Research Department of Statistics Norway 500, Research Department of Statistics Norway.
  6. Katarína Danišková & Jarko Fidrmuc, 2011. "Inflation Convergence and the New Keynesian, Phillips Curve in the Czech Republic," Working Papers, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) 292, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  7. Katarína Danišková & Jarko Fidrmuc, 2012. "Meta-Analysis of the New Keynesian Phillips Curve," Working Papers, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) 314, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  8. Boug, Pål & Cappelen, Adne & Swensen, Anders Rygh, 2010. "The new Keynesian Phillips curve revisited," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(5), pages 858-874, May.
  9. Mohamed Boutahar & David Gbaguidi, 2009. "Which Econometric Specification to Characterize the U.S. Inflation Rate Process?," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 34(2), pages 145-172, September.

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