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The Empirical (ir)Relevance of the New Keynesian Phillips Curve

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Author Info

  • Gunnar Bårdsen

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

  • Eilev S. Jansen

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

  • Ragnar Nymoen

    ()
    (Department of Economics, University of Oslo)

Abstract

We give an appraisal of the New Keynesian Phillips curve (NPC) as an empirical model of European inflation. We show that existing evidence reported in favour of the NPC on Euro-area and country data is due to a corroborative research strategy. In particular, goodness-of-fit is a weak criterion, since the NPC-fit is well approximated by a random walk. Instead we report the outcome of more critical tests, and the importance of modelling a system that includes the forcing variables as well as the rate of inflation is emphasized.Finally, encompassing tests are applied to open economy versions of the NPC for UK and Norway.

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Bibliographic Info

Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 2102.

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Length: 30 pages
Date of creation: 18 Jun 2002
Date of revision:
Handle: RePEc:nst:samfok:2102

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Keywords: New Keynesian Phillips curves; Euro inflation; UK inflation; Norwegian inflation; Monetary policy; Dynamic stability conditions; Evaluation; Encompassing tests;

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References

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Cited by:
  1. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2003. "The European Phillips Curve: Does the NAIRU Exist?," IZA Discussion Papers 876, Institute for the Study of Labor (IZA).
  2. James M. Nason & Gregor W. Smith, 2005. "Identifying the New Keynesian Phillips curve," Working Paper 2005-01, Federal Reserve Bank of Atlanta.
  3. Marika Karanassou & Hector Sala & Dennis J. Snower, 2008. "Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective," Discussion Papers 2008-08, School of Economics, The University of New South Wales.
  4. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2002. "A Reappraisal of the Inflation-Unemployment Tradeoff," IZA Discussion Papers 636, Institute for the Study of Labor (IZA).
  5. Janine Aron & John Muellbauer & Benjamin W. Smit, 2004. "A Structural Model of the Inflation Process in South Africa," Economics Series Working Papers WPS/2004-08, University of Oxford, Department of Economics.
  6. Karanassou, Marika & Snower, Dennis J., 2007. "Inflation Persistence and the Phillips Curve Revisited," IZA Discussion Papers 2600, Institute for the Study of Labor (IZA).
  7. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers 11, Central Bank of Luxembourg.

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