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The U.S. New Keynesian Phillips Curve: An Empirical Assessment

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  • Alain Guay
  • Florian Pelgrin

Abstract

The authors examine the evidence presented by Galí and Gertler (1999) and Galí, Gertler, and Lopez-Salido (2001, 2003) that the inflation dynamics in the United States can be well-described by the New Keynesian Phillips curve (NKPC). The authors address several important econometrics issues that arise in estimating the NKPC model. Using the continuously updated generalized method of moments (GMM) estimator proposed by Hansen, Heaton, and Yaron (1996) and the three-step GMM estimator developed by Bonnal and Renault (2003), the authors find that the empirical evidence for the real marginal cost is rather weak. Specifically, results are sensitive to the instrument sets, normalization, estimators, sample period, and data revisions.

Suggested Citation

  • Alain Guay & Florian Pelgrin, 2004. "The U.S. New Keynesian Phillips Curve: An Empirical Assessment," Staff Working Papers 04-35, Bank of Canada.
    • Handle: RePEc:bca:bocawp:04-35
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    Cited by:

    1. Choi, Yoonseok, 2021. "Inflation dynamics, the role of inflation at different horizons and inflation uncertainty," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 649-662.
    2. FAME,Eric Jondeau, University of Lausanne-HEC & Jean Imbs & Eric Jondeau & Florian Pelgrin, 2006. "Aggregating Phillips Curves," Computing in Economics and Finance 2006 314, Society for Computational Economics.
    3. Thorvardur Tjörvi Ólafsson, 2006. "The New Keynesian Phillips Curve: In Search of Improvements and Adaptation to the Open Economy," Economics wp31_tjorvi, Department of Economics, Central bank of Iceland.
    4. Gbaguidi, David, 2012. "La courbe de Phillips : temps d’arbitrage et/ou arbitrage de temps," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 87-119, mars.
    5. Philippe Goulet Coulombe, 2022. "A Neural Phillips Curve and a Deep Output Gap," Papers 2202.04146, arXiv.org, revised Oct 2024.
    6. Fabio Rumler, 2007. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Open Economies Review, Springer, vol. 18(4), pages 427-451, September.
    7. Agénor, Pierre-Richard & Bayraktar, Nihal, 2010. "Contracting models of the Phillips curve empirical estimates for middle-income countries," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 555-570, June.
    8. Faith Christian Cacnio, 2013. "Analysing inflation dynamics in the Philippines using the new Keynesian Phililips curve," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 50(2), pages 53-82, December.
    9. Frode Brevik & Manfred Gärtner, 2005. "Partisan Theory and the New Keynesian and Sticky-Information Phillips Curves," University of St. Gallen Department of Economics working paper series 2005 2005-25, Department of Economics, University of St. Gallen.
    10. Philippe Goulet Coulombe, 2022. "A Neural Phillips Curve and a Deep Output Gap," Working Papers 22-01, Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management.
    11. Mohamed Boutahar & David Gbaguidi, 2009. "Which Econometric Specification to Characterize the U.S. Inflation Rate Process?," Computational Economics, Springer;Society for Computational Economics, vol. 34(2), pages 145-172, September.
    12. Fructuoso Borrallo Egea & Pedro del Río López, 2021. "Monetary policy strategy and inflation in Japan," Occasional Papers 2116, Banco de España.
    13. Janko Gorter, 2005. "Subjective Expectations and New Keynesian Phillips Curves in Europe," DNB Working Papers 049, Netherlands Central Bank, Research Department.

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    More about this item

    Keywords

    Inflation and prices; Econometric and statistical methods;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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