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The New Keynesian Phillips curve : lessons from single-equation econometric estimation

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  • James M. Nason
  • Gregor W. Smith

Abstract

We review single-equation methods for estimating the hybrid New Keynesian Phillips curve (NKPC) and then apply those methods to U.S. quarterly data for 1955?2007. Estimating the hybrid NKPC by the generalized method of moments yields stable coefficients with a large role for expected future inflation. Measures of marginal costs better explain U.S. inflation than does a range of measures of the output gap. But estimates of the slope of the NKPC are imprecise and confidence intervals that are robust to weak identification are wide. Further research on measuring marginal costs may reconcile these mixed findings. A reconciliation is important if the NKPC is to remain a fundamental component of models of the monetary transmission mechanism.

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  • James M. Nason & Gregor W. Smith, 2008. "The New Keynesian Phillips curve : lessons from single-equation econometric estimation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 361-395.
  • Handle: RePEc:fip:fedreq:y:2008:i:fall:p:361-395:n:v.94no.4
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    Cited by:

    1. Somayeh Mardaneh, 2012. "How Do Oil Shocks A¤ect the Structural Stability of Hybrid New Keynesian Phillips Curve?," Discussion Papers in Economics 12/20, Department of Economics, University of Leicester.
    2. Temitope Leshoro & Umakrishnan Kollamparambil, 2016. "Inflation Or Output Targeting? Monetary Policy Appropriateness In South Africa," PSL Quarterly Review, Economia civile, vol. 69(276), pages 77-104.
    3. Thomas A. Lubik & Wing Leong Teo, "undated". "Deep Habits in the New Keynesian Phillips Curve," Discussion Papers 11/13, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    4. Markku Lanne & Jani Luoto, 2014. "Does Output Gap, Labour's Share or Unemployment Rate Drive Inflation?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 715-726, October.
    5. Juan Hatchondo, 2004. "The value of information with heterogeneous agents and partially revealing prices," Econometric Society 2004 North American Summer Meetings 175, Econometric Society.
    6. David Backus & Mikhail Chernov & Stanley E. Zin, 2013. "Identifying Taylor Rules in Macro-Finance Models," NBER Working Papers 19360, National Bureau of Economic Research, Inc.
    7. Vít Pošta, 2015. "Semi-structural estimates of time-varying NAIRU based on the new Keynesian Phillips curve: evidence from Eastern European economies," Empirical Economics, Springer, pages 1217-1243.
    8. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, pages 124-188.
    9. Lanne, Markku & Luoto, Jani, 2013. "Autoregression-based estimation of the new Keynesian Phillips curve," Journal of Economic Dynamics and Control, Elsevier, pages 561-570.
    10. Jagadish Prasad Sahu, 2013. "Inflation dynamics in India: A hybrid New Keynesian Phillips Curve approach," Economics Bulletin, AccessEcon, vol. 33(4), pages 2634-2647.
    11. Nalan Basturk & Cem Cakmakli & Pinar Ceyhan & Herman K. van Dijk, 2013. "Posterior-Predictive Evidence on US Inflation using Extended Phillips Curve Models with non-filtered Data," Koç University-TUSIAD Economic Research Forum Working Papers 1321, Koc University-TUSIAD Economic Research Forum.
    12. Smith, Gregor W., 2009. "Pooling forecasts in linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(11), pages 1858-1866, November.
    13. Jean-Baptiste, Frédo, 2012. "Forecasting with the New Keynesian Phillips curve: Evidence from survey data," Economics Letters, Elsevier, vol. 117(3), pages 811-813.
    14. Alexis Maka & Fernando De Holanda Barbosa, 2014. "Phillips Curves: An Encompassing Test," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 061, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    15. Claudio Borio & Piti Disyatat & Mikael Juselius, 2014. "A parsimonious approach to incorporating economic information in measures of potential output," BIS Working Papers 442, Bank for International Settlements.
    16. Lubik, Thomas A. & Teo, Wing Leong, 2012. "Inventories, inflation dynamics and the New Keynesian Phillips curve," European Economic Review, Elsevier, vol. 56(3), pages 327-346.
    17. Tomasz Grabia, 2014. "Kontrowersje wokół koncepcji krzywej Phillipsa," Gospodarka Narodowa, Warsaw School of Economics, issue 5, pages 5-28.
    18. Szafranek, Karol, 2017. "Flattening of the New Keynesian Phillips curve: Evidence for an emerging, small open economy," Economic Modelling, Elsevier, vol. 63(C), pages 334-348.
    19. José Francisco Bellod Redondo, 2013. "La NAIRU y la pseudociencia neoliberal," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 16, pages 18-43.
    20. Ahrens, Steffen & Hartmann, Matthias, 2014. "State-dependence vs. timedependence: An empirical multi-country investigation of price sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy (IfW).
    21. Nalan Baştürk & Cem Çakmakli & S. Pinar Ceyhan & Herman K. Van Dijk, 2014. "Posterior‐Predictive Evidence On Us Inflation Using Extended New Keynesian Phillips Curve Models With Non‐Filtered Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(7), pages 1164-1182, November.
    22. Edward Simpson Prescott, 2012. "Contingent capital: the trigger problem," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 33-50.
    23. Sohei Kaihatsu & Jouchi Nakajima, 2015. "Has Trend Inflation Shifted?: An Empirical Analysis with a Regime-Switching Model," Bank of Japan Working Paper Series 15-E-3, Bank of Japan.
    24. Thomas A. Lubik & Wing Leong Teo, 2014. "Deep Habits in the New Keynesian Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 79-114, February.
    25. Abbas, Syed Kanwar & Sgro, Pasquale M., 2011. "New Keynesian Phillips Curve and inflation dynamics in Australia," Economic Modelling, Elsevier, vol. 28(4), pages 2022-2033, July.

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    Inflation (Finance) ; Phillips curve;

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