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Short-Run Dynamics of Inflation: Estimating a Hybrid New-Keynesian Phillips Curve for Argentina (1993-2007)

  • Laura D’Amato

    ()

    (Central Bank of Argentina)

  • María Lorena Garegnani

    ()

    (Central Bank of Argentina)

We estimate a “Hybrid New-Keynesian Phillips Curve” for Argentina between 1993 and 2007. We extend the model to a small open economy, considering separately the influence of nominal devaluation and foreign inflation on domestic prices. For the whole sample, we find that forward and backward-looking components are relevant although the backward-looking term weights more in determining inflation dynamics. We test for parameter stability and find a break-point in 2002 along with the regime change. In line with recent literature on trend inflation, when trend inflation increases, the influence of the output gap weakens and the curve becomes more forward-looking.

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Article provided by Central Bank of Argentina, Economic Research Department in its journal Ensayos Económicos.

Volume (Year): 1 (2009)
Issue (Month): 55 (July - September)
Pages: 33-56

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Handle: RePEc:bcr:ensayo:v:1:y:2009:i:55:p:33-56
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  1. Luca Guerrieri, 2002. "The inflation persistence of staggered contracts," International Finance Discussion Papers 734, Board of Governors of the Federal Reserve System (U.S.).
  2. Guido Ascari & Tiziano Ropele, 2005. "Trend Inflation, Taylor Principle and Indeterminacy," Working Papers 93, University of Milano-Bicocca, Department of Economics, revised Oct 2005.
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  5. Lars E. O. Svensson, 2000. "Open-Economy Inflation Targeting," NBER Working Papers 6545, National Bureau of Economic Research, Inc.
  6. Michael Kiley, 2004. "Is Moderate-To-High Inflation Inherently Unstable?," Econometric Society 2004 North American Summer Meetings 193, Econometric Society.
  7. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850.
  8. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  9. Andrews, Donald W K & Fair, Ray C, 1988. "Inference in Nonlinear Econometric Models with Structural Change," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 615-39, October.
  10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  11. Michael Dotsey, 2002. "Pitfalls in interpreting tests of backward-looking pricing in New Keynesian models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 37-50.
  12. repec:sae:niesru:v:164:y::i:1:p:100-109 is not listed on IDEAS
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