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International evidence on the new Keynesian Phillips Curve using aggregate and disaggregate data

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  • Joseph P. Byrne
  • Alexandros Kontonikas
  • Alberto Montagnoli

Abstract

We present a unique empirical analysis of the properties of the New Keynesian Phillips Curve using an international dataset of aggregate and disaggregate sectoral inflation. Our results from panel time-series estimation clearly indicate that sectoral heterogeneity has important consequences for aggregate inflation behaviour. Heterogeneity helps to explain the overesti- mation of inflation persistence and underestimation of the role of marginal costs in empirical investigations of the NKPC that use aggregate data. We find that combining disaggregate information with heterogeneous-consistent estimation techniques helps to reconcile, to a large extent, the NKPC with the data.

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File URL: http://www.gla.ac.uk/media/media_163472_en.pdf
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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2010_18.

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Date of creation: Jul 2010
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Handle: RePEc:gla:glaewp:2010_18

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Keywords: New Keynesian Phillips Curve; Heterogeneity; Aggregation Bias.;

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  1. Bart van Ark & Mary O'Mahoney & Marcel P. Timmer, 2008. "The Productivity Gap between Europe and the United States: Trends and Causes," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 25-44, Winter.
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Cited by:
  1. Norkute, Milda, 2013. "Assessing the New Keynesian Phillips Curve in the Euro Area Using Disaggregate Data," Working Papers 2013:31, Lund University, Department of Economics.
  2. Tiwari, Aviral Kumar & Oros, Cornel & Albulescu, Claudiu Tiberiu, 2014. "Revisiting the inflation–output gap relationship for France using a wavelet transform approach," Economic Modelling, Elsevier, vol. 37(C), pages 464-475.

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