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Robust Estimates of the New Keynesian Phillips Curve

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Author Info

  • Paul Levine

    (University of Surrey)

  • Luis F. Martins

    (Department of Quantitative Methods, ISCTE, Portugal)

  • Vasco J. Gabriel

    (University of Surrey and NIPE-UM)

Abstract

In this paper, we examine the hybrid specification of the New Keynesian Phillips Curve (NKPC) proposed by Gali and Gertler (1999) by employing recently developed momentconditions inference procedures. These methods provide a more efficient and reliable econometric framework for the analysis of the NKPC. In particular, we address the issue of parameter identification, providing robust estimates and confidence sets for the model’s parameters. Our results show that the NKPC remains a valid and reliable empirical tool to explain inflation dynamics.

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Bibliographic Info

Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0206.

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Length: 16 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:sur:surrec:0206

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Keywords: price regulation; commitment problem; ratchet effect; under-investment;

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References

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  1. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
  2. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  3. Ma, Adrian, 2002. "GMM estimation of the new Phillips curve," Economics Letters, Elsevier, vol. 76(3), pages 411-417, August.
  4. Whitney Newey & Richard Smith, 2003. "Higher order properties of GMM and generalised empirical likelihood estimators," CeMMAP working papers CWP04/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  8. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Jordi Galí & Mark Gertler & David López-Salido, 2005. "Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve," Banco de Espa�a Working Papers 0520, Banco de Espa�a.
  10. Guggenberger, Patrik & Smith, Richard J., 2005. "Generalized Empirical Likelihood Estimators And Tests Under Partial, Weak, And Strong Identification," Econometric Theory, Cambridge University Press, vol. 21(04), pages 667-709, August.
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Cited by:
  1. Rolf Scheufele, 2008. "Evaluating the German (New Keynesian) Phillips Curve," IWH Discussion Papers 10, Halle Institute for Economic Research.

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