IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Contracting models of the Phillips curve empirical estimates for middle-income countries

Listed author(s):
  • Agénor, Pierre-Richard
  • Bayraktar, Nihal

This paper provides empirical estimates of contracting models of the Phillips curve for eight middle-income developing countries (Chile, Colombia, Korea, Malaysia, Mexico, Morocco, Tunisia, and Turkey). Following an analytical review, a variety of models with one and more leads and lags are estimated using two-step GMM techniques. Nested and non-nested tests are used to select a specification for each country, and in-sample predictive capacity and stability are analyzed. Higher-dimension models tend to perform better than parsimonious models with one lead and one lag. Except for Colombia and Korea, backward-looking behavior has a relatively larger impact on inflation dynamics. World oil prices and relative input prices have a limited effect, whereas borrowing costs are significant for Korea and Mexico.

If 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.

File URL: http://www.sciencedirect.com/science/article/pii/S0164-0704(09)00064-0
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 2 (June)
Pages: 555-570

as
in new window

Handle: RePEc:eee:jmacro:v:32:y:2010:i:2:p:555-570
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Campbell Leith & Jim Malley, 2007. "Estimated Open Economy New Keynesian Phillips Curves for the G7," Open Economies Review, Springer, vol. 18(4), pages 405-426, September.
  2. Florian PELGRIN & GUAY Alain & LUGER Richard, 2004. "The New Keynesian Phillips Curve: An Empirical Assessment," Computing in Economics and Finance 2004 212, Society for Computational Economics.
  3. Chowdhury, Ibrahim & Hoffmann, Mathias & Schabert, Andreas, 2006. "Inflation dynamics and the cost channel of monetary transmission," European Economic Review, Elsevier, vol. 50(4), pages 995-1016, May.
  4. Jose De Gregorio. & Oscar Landerretche. & Christopher Neilson., 2007. "Another Pass-Through Bites the Dust? Oil Prices and Inflation," Working Papers Central Bank of Chile 417, Central Bank of Chile.
  5. Ulf Söderström & Paul Söderlind & Anders Vredin, 2005. "New-Keynesian Models and Monetary Policy: A Re-examination of the Stylized Facts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(3), pages 521-546, 09.
  6. Douglas Laxton & Guy Meredith & David Rose, 1995. "Asymmetric Effects of Economic Activity on Inflation: Evidence and Policy Implications," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 344-374, June.
  7. C. John McDermott & Eswar S Prasad & Pierre-Richard Agénor, 1999. "Macroeconomic Fluctuations in Developing Countries; Some Stylized Facts," IMF Working Papers 99/35, .
  8. Pierre-Richard Agénor & Peter J. Montiel, 2007. "Monetary Policy Analysis in a Small Open Credit-Based Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 90, Economics, The Univeristy of Manchester.
  9. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
  10. Lawless, Martina & Whelan, Karl T., 2011. "Understanding the dynamics of labor shares and inflation," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 121-136, June.
  11. Karanassou, Marika & Snower, Dennis J., 2007. "Inflation Persistence and the Phillips Curve Revisited," IZA Discussion Papers 2600, Institute for the Study of Labor (IZA).
  12. Stephane Dees & M. Hashem Pesaran & L. Vanessa Smith & Ron P. Smith, 2009. "Identification of New Keynesian Phillips Curves from a Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(7), pages 1481-1502, October.
  13. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
  14. Pierpaolo Benigno & David López-Salido, 2002. "Inflation persistence and optimal monetary policy in the euro area," International Finance Discussion Papers 749, Board of Governors of the Federal Reserve System (U.S.).
  15. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  16. Gwin, Carl R. & VanHoose, David D., 2008. "Alternative measures of marginal cost and inflation in estimations of new Keynesian inflation dynamics," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 928-940, September.
  17. Peter N. Ireland, 2000. "Money's Role in the Monetary Business Cycle," Boston College Working Papers in Economics 458, Boston College Department of Economics.
  18. Jeremy Rudd & Karl Whelan, 2007. "Modeling Inflation Dynamics: A Critical Review of Recent Research," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 155-170, 02.
  19. Alain Guay & Florian Pelgrin, 2004. "The U.S. New Keynesian Phillips Curve: An Empirical Assessment," Staff Working Papers 04-35, Bank of Canada.
  20. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
  21. Laurence Ball & David Romer, 1987. "Real Rigidities and the Non-Neutrality of Money," NBER Working Papers 2476, National Bureau of Economic Research, Inc.
  22. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2006. "The New Keynesian Phillips Curve: from Sticky Inflation to Sticky Prices," The School of Economics Discussion Paper Series 0631, Economics, The University of Manchester.
  23. Erceg, Christopher J. & Levin, Andrew T., 2003. "Imperfect credibility and inflation persistence," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 915-944, May.
  24. Jordi Galí & Tommaso Monacelli, 2004. "Monetary policy and exchange rate volatility in a small open economy," Economics Working Papers 835, Department of Economics and Business, Universitat Pompeu Fabra.
  25. James M. Nason & Gregor W. Smith, 2005. "Identifying the New Keynesian Phillips Curve," Working Papers 1026, Queen's University, Department of Economics.
  26. Fuhrer, Jeffrey C, 1997. "The (Un)Importance of Forward-Looking Behavior in Price Specifications," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 338-350, August.
  27. Luis F. Céspedes & Marcelo Ochoa & Claudio Soto, 2005. "The New Keynesian Phillips Curve in an Emerging Market Economy: The Case of Chile," Working Papers Central Bank of Chile 355, Central Bank of Chile.
  28. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 1-84.
  29. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  30. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2001. "European Inflation Dynamics," NBER Working Papers 8218, National Bureau of Economic Research, Inc.
  31. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  32. Ben S. Bernanke & Julio J. Rotemberg, 1997. "NBER Macroeconomics Annual 1997, Volume 12," NBER Books, National Bureau of Economic Research, Inc, number bern97-1.
  33. Wang, Pengfei & Wen, Yi, 2007. "Inflation dynamics: A cross-country investigation," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2004-2031, October.
  34. Fabio Rumler, 2005. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Working Papers 102, Oesterreichische Nationalbank (Austrian Central Bank).
  35. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
  36. Luca Fanelli, 2008. "Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(1), pages 53-66, 02.
  37. Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
  38. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
  39. Moons, Cindy & Garretsen, Harry & van Aarle, Bas & Fornero, Jorge, 2007. "Monetary policy in the New-Keynesian model: An application to the Euro Area," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 879-902.
  40. Ben S. Bernanke & Julio J. Rotemberg (ed.), 1997. "NBER Macroeconomics Annual 1997," MIT Press Books, The MIT Press, edition 1, volume 1, number 026252242x, December.
  41. Steinar Holden & John C. Driscoll, 2003. "Inflation Persistence and Relative Contracting," American Economic Review, American Economic Association, vol. 93(4), pages 1369-1372, September.
  42. Nicoletta Batini & Ryan Banerjee, 2004. "Inflation Dynamics in Seven Industrialised Open Economies," Computing in Economics and Finance 2004 116, Society for Computational Economics.
  43. Ravenna, Federico & Walsh, Carl E., 2006. "Optimal monetary policy with the cost channel," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 199-216, March.
  44. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, 02.
  45. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
  46. Ascari, Guido & Merkl, Christian, 2007. "Real Wage Rigidities and the Cost of Disinflations," IZA Discussion Papers 3049, Institute for the Study of Labor (IZA).
  47. Guillermo Calvo & Oya Celasun & Michael Kumhof, 2003. "Inflation Inertia and Credible Disinflation - The Open Economy Case," NBER Working Papers 9557, National Bureau of Economic Research, Inc.
  48. Ravi Balakrishnan & J David Lopez-Salido, 2002. "Understanding UK inflation: the role of openness," Bank of England working papers 164, Bank of England.
  49. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  50. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  51. Bruce E. Hansen, 1998. "Testing for Structural Change in Conditional Models," Boston College Working Papers in Economics 310., Boston College Department of Economics.
  52. Gagnon, Edith & Khan, Hashmat, 2005. "New Phillips curve under alternative production technologies for Canada, the United States, and the Euro area," European Economic Review, Elsevier, vol. 49(6), pages 1571-1602, August.
  53. Sbordone, Argia M., 2007. "Inflation persistence: Alternative interpretations and policy implications," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1311-1339, July.
  54. Apergis, Nicholas & Miller, Stephen, 2004. "Macroeconomic rationality and Lucas' misperceptions model: further evidence from 41 countries," Journal of Economics and Business, Elsevier, vol. 56(3), pages 227-241.
  55. Hans Genberg & LaurentL. Pauwels, 2005. "An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 10(2), pages 261-277, 06.
  56. Roberts John M., 2005. "How Well Does the New Keynesian Sticky-Price Model Fit the Data?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-39, September.
  57. Guy M Meredith & Bankim Chadha & Paul R Masson, 1991. "Models of Inflation and the Costs of Disinflation," IMF Working Papers 91/97, .
  58. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2004. "Econometric Evaluation of the New Keynesian Phillips Curve," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 671-686, 09.
  59. Pierre-Richard Agénor, 2001. "Monetary Policy Under Flexible Exchange Rates: an Introduction to Inflation Targeting," Working Papers Central Bank of Chile 124, Central Bank of Chile.
  60. Kevin D. Sheedy, 2007. "Intrinsic inflation persistence," LSE Research Online Documents on Economics 3739, London School of Economics and Political Science, LSE Library.
  61. Alfred V. Guender, 2006. "Stabilising Properties of Discretionary Monetary Policies in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 116(508), pages 309-326, 01.
  62. Dupasquier, Chantal & Ricketts, Nicholas, 1998. "Non-Linearities in the Output-Inflation Relationship: Some Empirical Results for Canada," Staff Working Papers 98-14, Bank of Canada.
  63. Luca Guerrieri, 2002. "The inflation persistence of staggered contracts," International Finance Discussion Papers 734, Board of Governors of the Federal Reserve System (U.S.).
  64. Kozicki, Sharon & Tinsley, P. A., 2002. "Dynamic specifications in optimizing trend-deviation macro models," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1585-1611, August.
  65. Akyuz, Yilmaz & Boratav, Korkut, 2003. "The Making of the Turkish Financial Crisis," World Development, Elsevier, vol. 31(9), pages 1549-1566, September.
  66. David Coble, 2008. "Dinámica de la inflación y el canal de costos: Una aplicación para Chile," Working Papers wp274, University of Chile, Department of Economics.
  67. Ben S. Bernanke & Julio J. Rotemberg, 1997. "Editorial in "NBER Macroeconomics Annual 1997, Volume 12"," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 1-6 National Bureau of Economic Research, Inc.
  68. Sbordone, A.M., 1998. "Prices and Unit Labor Costs: a New Test of Price Stickiness," Papers 653, Stockholm - International Economic Studies.
  69. Jón Steinsson, 2000. "Optimal monetary policy in an economy with inflation persistence," Economics wp11, Department of Economics, Central bank of Iceland.
  70. Clark, Peter & Laxton, Douglas & Rose, David, 2001. "An Evaluation of Alternative Monetary Policy Rules in a Model with Capacity Constraints," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 42-64, February.
  71. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
  72. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing and the General Equilibrium Dynamics of Money and Output," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 655-690.
  73. Dolado, Juan J. & Maria-Dolores, Ramon & Naveira, Manuel, 2005. "Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve," European Economic Review, Elsevier, vol. 49(2), pages 485-503, February.
  74. Ascari, Guido & Merkl, Christian, 2007. "Real wage rigidities and the cost of disinflations: A comment on Blanchard and Galí," Kiel Working Papers 1312, Kiel Institute for the World Economy (IfW).
  75. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  76. Jondeau, Eric & Le Bihan, Herve, 2005. "Testing for the New Keynesian Phillips Curve. Additional international evidence," Economic Modelling, Elsevier, vol. 22(3), pages 521-550, May.
  77. 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 421-448, June.
  78. Musy, Olivier, 2006. "Inflation persistence and the real costs of disinflation in staggered prices and partial adjustment models," Economics Letters, Elsevier, vol. 91(1), pages 50-55, April.
  79. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
  80. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
  81. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
  82. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
  83. Andersen, Torben M., 1998. "Persistency in sticky price models," European Economic Review, Elsevier, vol. 42(3-5), pages 593-603, May.
  84. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
  85. Philip Liu, 2006. "A Small New Keynesian Model of the New Zealand economy," Reserve Bank of New Zealand Discussion Paper Series DP2006/03, Reserve Bank of New Zealand.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:32:y:2010:i:2:p:555-570. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.