A multimarket approach to estimate a New Keynesian Phillips Curve

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A multimarket approach to estimate a New Keynesian Phillips Curve

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Juan de Dios Tena ()
Jorge Dresdner ()
Ivan Araya ()

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Juan de Dios Tena

Abstract

We propose a new approach to estimate and "hybrid" New Keynesian Phillips Curve (NKPC) that includes demand pressures coming from disequilibrium relations in three different markets: (1) the monetary and financial, (2) the international, and (3) the labor market. In the application, our results show that all three markets contribute to the evolution of inflation. However, the effect of shocks on equilibrium in the labour market and short run movements in cyclical output are relatively more important than other shocks. Based on econometric tests, this specification is proved to be superior to the traditional NKPC that includes a single variable to account for demand pressures.

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Paper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws076917.

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Date of creation: Oct 2007
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Handle: RePEc:cte:wsrepe:ws076917

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This paper has been announced in the following NEP Reports:

NEP-ALL-2007-10-27 (All new papers)
NEP-CBA-2007-10-27 (Central Banking)
NEP-MAC-2007-10-27 (Macroeconomics)
NEP-MON-2007-10-27 (Monetary Economics)

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