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The new Keynesian Phillips curve: endogeneity and misspecification

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  • Christopher Malikane
  • Tshepo Mokoka

Abstract

The wrong or insignificant sign of the forcing variable in the new Keynesian Phillips curve estimations may be a result of the endogeneity of the labour share and misspecification of real marginal cost in the baseline model. We address the misspecification of real marginal cost by formulating a broad measure that features the labour share, output gap and supply shock variables. The endogeneity of the labour share is addressed by using an appropriate lag of the labour share in the Phillips curve. Reduced-form evidence from five developed and five emerging market economies support the empirical validity of the NKPC.

Suggested Citation

  • Christopher Malikane & Tshepo Mokoka, 2014. "The new Keynesian Phillips curve: endogeneity and misspecification," Applied Economics, Taylor & Francis Journals, vol. 46(25), pages 3082-3089, September.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:25:p:3082-3089
    DOI: 10.1080/00036846.2014.922672
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    Cited by:

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    2. Medel, Carlos, 2015. "Inflation Dynamics and the Hybrid Neo Keynesian Phillips Curve: The Case of Chile," MPRA Paper 62609, University Library of Munich, Germany.
    3. Abbas Valadkhani, 2015. "Asymmetric size-dependent effects of the output gap on inflation: US evidence from the last half a century," Applied Economics, Taylor & Francis Journals, vol. 47(33), pages 3525-3539, July.
    4. Kalim Hyder & Stephen G. Hall, 2020. "Estimates of the New Keynesian Phillips Curve for Pakistan," Empirical Economics, Springer, vol. 59(2), pages 871-886, August.
    5. Kristina Matuzeviciute & Mindaugas Butkus & Akvile Karaliute, 2017. "Do Technological Innovations Affect Unemployment? Some Empirical Evidence from European Countries," Economies, MDPI, vol. 5(4), pages 1-19, December.

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