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Is the New Keynesian Phillips curve flat?

  • Kuester, Keith
  • Müller, Gernot J.
  • Stölting, Sarah

This paper provides Monte Carlo evidence that GMM estimates of the New Keynesian Phillips curve are biased towards finding too much price rigidity if cost-push shocks are auto-correlated. This result may reconcile GMM estimates with the microevidence on price rigidities.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 103 (2009)
Issue (Month): 1 (April)
Pages: 39-41

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Handle: RePEc:eee:ecolet:v:103:y:2009:i:1:p:39-41
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  7. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
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  9. Sophocles Mavroeidis, 2004. "Weak Identification of Forward-looking Models in Monetary Economics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 609-635, 09.
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  16. Linde, Jesper, 2005. "Estimating New-Keynesian Phillips curves: A full information maximum likelihood approach," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1135-1149, September.
  17. Batini, Nicoletta & Jackson, Brian & Nickell, Stephen, 2005. "An open-economy new Keynesian Phillips curve for the U.K," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1061-1071, September.
  18. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
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  21. Argia M. Sbordone, 2005. "Do expected future marginal costs drive inflation dynamics?," Staff Reports 204, Federal Reserve Bank of New York.
  22. Mavroeidis, Sophocles, 2005. "Identification Issues in Forward-Looking Models Estimated by GMM, with an Application to the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 421-48, June.
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