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The New Keynesian Phillips Curve: An empirical assessment

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  • Florian PELGRIN
  • Alain GUAY
  • Richard LUGER

Abstract

The recent works of Gali and Gertler (1999) and Gali, Gertler and Lopez-Salido (2001) provide evidence supporting the New Keynesian Phillips curve (NKPC). This model posits the dynamics of inflation as being forward-looking and related to real marginal costs. In this paper, we examine the empirical relevance of their results for the United States. Our approach addresses several important econometric issues with the standard approaches typically used for estimation and inference in NKPC models. Using the continously-updated GMM estimator proposed by Hansen, Heaton and Yaron (1996) and the 3-step GMM estimator developed by Bonnal and Renault (2003), the empirical evidence of the NKPC is rather mixed. Specifically, results are sensitive to the instruments sets, normalisation, estimators, the sample period and revisions of data

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 418.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:418

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Keywords: GMM; Phillips Curve; Inflation dynamics;

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Cited by:
  1. Agénor, Pierre-Richard & Bayraktar, Nihal, 2010. "Contracting models of the Phillips curve empirical estimates for middle-income countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 32(2), pages 555-570, June.
  2. Frode Brevik & Manfred Gärtner, 2005. "Partisan Theory and the New Keynesian and Sticky-Information Phillips Curves," University of St. Gallen Department of Economics working paper series 2005, Department of Economics, University of St. Gallen 2005-25, Department of Economics, University of St. Gallen.
  3. FAME,Eric Jondeau, University of Lausanne-HEC & Jean Imbs & Eric Jondeau & Florian Pelgrin, 2006. "Aggregating Phillips Curves," Computing in Economics and Finance 2006, Society for Computational Economics 314, Society for Computational Economics.
  4. Fabio Rumler, 2007. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Open Economies Review, Springer, Springer, vol. 18(4), pages 427-451, September.
  5. Janko Gorter, 2005. "Subjective Expectations and New Keynesian Phillips Curves in Europe," DNB Working Papers, Netherlands Central Bank, Research Department 049, Netherlands Central Bank, Research Department.
  6. 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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