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The New Keynesian Phillips Curve: An empirical assessment

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Author Info
Florian PELGRIN
Alain GUAY
Richard LUGER

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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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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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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.:
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    Other versions:
  3. Michael Dotsey, 2002. "Pitfalls in interpreting tests of backward-looking pricing in New Keynesian models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 37-50. [Downloadable!]
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  8. Edith Gagnon & Hashmat Khan, 2001. "New Phillips Curve with Alternative Marginal Cost Measures forCanada, the United States, and the Euro Area," Working Papers 01-25, Bank of Canada. [Downloadable!]
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  27. Ma, Adrian, 2002. "GMM estimation of the new Phillips curve," Economics Letters, Elsevier, vol. 76(3), pages 411-417, August. [Downloadable!] (restricted)
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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. Fabio Rumler, 2005. "Estimates of the open economy New Keynesian Phillips curve for euro area countries," Working Paper Series 496, European Central Bank. [Downloadable!]
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  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 2005-25, Department of Economics, University of St. Gallen. [Downloadable!]
  3. Sophocles N. Brissimis & Nicholas S. Magginas, 2006. "Inflation Forecasts and the New Keynesian Phillips Curve," Working Papers 38, Bank of Greece. [Downloadable!]
    Other versions:
  4. Jean Imbs & Eric Jondeau & Florian Pelgrin, 2007. "Aggregating Phillips curves," Working Paper Series 785, European Central Bank. [Downloadable!]
    Other versions:
  5. Janko Gorter, 2005. "Subjective Expectations and New Keynesian Phillips Curves in Europe," DNB Working Papers 049, Netherlands Central Bank, Research Department. [Downloadable!]
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