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A New Keynesian Framework and Wage and Price Dynamics in the US

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  • Bjørnar Karlsen Kivedal

    (Department of Economics, Norwegian University of Science and Technology)

Abstract

New Keynesian model with wages and prices is introduced and estimated by maximum likelihood. The steady state relationships of the model are imposed as testable restrictions on the long-run cointegrating relationships in an equilibrium correction framework, giving an equilibrium correction model with imposed theoretical restrictions from a New Keynesian model. Short-run properties are also estimated and investigated. The results indicate that the main aspects of the theoretical model cannot be rejected. Hence, New Keynesian models may be combined with a more general vector autoregressive framework in order to conduct estimation.

Suggested Citation

  • Bjørnar Karlsen Kivedal, 2013. "A New Keynesian Framework and Wage and Price Dynamics in the US," Working Paper Series 15113, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:15113
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    More about this item

    Keywords

    Cointegration; New Keynesian models; steady state; wages; prices; unemployment; equilibrium correction.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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