Testing the Invariance of Expectations Models of Inflation
AbstractThe new-Keynesian Phillips curve (NKPC) includes expected future inflation as a major feedforward variable to explain current inflation.� Models of this type are regularly estimated by replacing the expected value by the actual future outcome, then using Instrumental Variables or Generalized Method of Moments methods to estimate the parameters.� However, the underlying theory does not allow for various forms of non-stationarity in the data - despite the fact that crises, breaks and regimes shifts are relatively common.� We investigate the consequences for NKPC estimation of breaks in data processes using the new technique of impulse-indicator saturation, and apply the resulting methods to salient published studies to check their viablility.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 510.
Date of creation: 01 Nov 2010
Date of revision:
New-Keynesian Phillips curve; inflation expectations; structural breaks; impulse-indicator saturation;
Other versions of this item:
- Nymoen, Ragnar & L. Castle, Jennifer & A. Doornik, Jurgen & F. Hendry, David, 2010. "Testing the Invariance of Expectations Models of Inflation," Memorandum 21/2010, Oslo University, Department of Economics.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-CBA-2010-11-20 (Central Banking)
- NEP-ECM-2010-11-20 (Econometrics)
- NEP-MON-2010-11-20 (Monetary Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bill Russell & Rosen Azad Chowdhury, 2012.
"Estimating United States Phillips Curves With Expectations Consistent With The Statistical Process Of Inflation,"
Dundee Discussion Papers in Economics
265, Economic Studies, University of Dundee.
- Russell, Bill & Chowdhury, Rosen Azad, 2013. "Estimating United States Phillips curves with expectations consistent with the statistical process of inflation," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 24-38.
- Russell, Bill & Chowdhury, Rosen Azad, 2012. "Estimating United States Phillips Curves With Expectations Consistent With The Statistical Process Of Inflation," SIRE Discussion Papers 2012-13, Scottish Institute for Research in Economics (SIRE).
- Nymoen, Ragnar & Swensen, Anders Rygh & Tveter, Eivind, 2012. "Interpreting the evidence for New Keynesian models of inflation dynamics," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 253-263.
- Cornea, A. & Hommes, C.H. & Massaro, D., 2012.
"Behavioral Heterogeneity in U.S. Inflation Dynamics,"
CeNDEF Working Papers
12-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Adriana Cornea & Cars Hommes & Domenico Massaro, 2013. "Behavioral Heterogeneity in U.S. Inflation Dynamics," Tinbergen Institute Discussion Papers 13-015/II, Tinbergen Institute.
- J. James Reade & Ulrich Volz, 2011. "From the General to the Specific," Discussion Papers 11-18, Department of Economics, University of Birmingham.
- Hendry, David F., 2011. "On adding over-identifying instrumental variables to simultaneous equations," Economics Letters, Elsevier, vol. 111(1), pages 68-70, April.
- Mariano Kulish & Adrian Pagan, 2013.
"Issues in Estimating New-Keynesian Phillips Curves in the Presence of Unknown Structural Change,"
RBA Research Discussion Papers
rdp2013-11, Reserve Bank of Australia.
- Mariano Kulish & Adrian Pagan, 2013. "Issues in Estimating New Keynesian Phillips Curves in the Presence of Unknown Structural Change," NCER Working Paper Series 94, National Centre for Econometric Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.