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The New Keynesian Phillips Curve For The Euro Area: Which Specification?

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  • Emmanuel Carré

Abstract

The New Keynesian Phillips Curve (NKPC) specification in the Euro area is controversial. For some it is purely forward-looking, when others incorporate a backward-looking component into a ‘hybrid’ NKPC (HNKPC). This article contributes to this debate first by drawing stylised facts of the Euro area (H)NKPC from a quantitative review of 88 comparable empirical estimates from 21 articles. If the forward-looking share dominates, a substantial backward-looking fraction is found (about one-third). This result is fairly robust to sub-sample and simple tests. It is also shown that micro evidence from firms’ pricing surveys is favourable to this result. Since the observed variations in estimates could be a limitation to this otherwise clear result, the second contribution of this article is to explore the factors driving these variations. Finally, policy implications are examined.

Suggested Citation

  • Emmanuel Carré, 2010. "The New Keynesian Phillips Curve For The Euro Area: Which Specification?," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(3/4), pages 337-356.
  • Handle: RePEc:bxr:bxrceb:2013/80984
    Note: Special Issue "26th Symposium on Money, Banking and Finance" Guest Editors :Sébastien Galanti and Grégory Levieuge
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    Keywords

    New Keynesian Phillips Curve; Inflation persistence;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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