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Studying the Short-Run Dynamics of Inflation: Estimating a Hybrid New-Keynesian Phillips Curve for Argentina (1993-2007)

  • Laura D´Amato

    ()

    (Central Bank of Argentina)

  • Lorena Garegnani

    ()

    (Central Bank of Argentina)

We estimate a “Hybrid New-Keynesian Phillips Curve” for Argentina between 1993 and 2007. We extend the model to a small open economy, considering separately the influence of nominal devaluation and foreign inflation on domestic prices. For the whole sample, we find that forward and backward-looking components are relevant although the backward-looking term weights more in determining inflation dynamics. We test for parameter stability and find a break-point in 2002 along with the regime change. In line with recent literature on trend inflation, when trend inflation increases, the influence of the output gap weakens and the curve becomes more forward-looking.

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Paper provided by Central Bank of Argentina, Economic Research Department in its series BCRA Working Paper Series with number 200940.

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Length: 19 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:bcr:wpaper:200940
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  1. Guido Ascari & Tiziano Ropele, 2009. "Trend inflation, Taylor principle and indeterminacy," Temi di discussione (Economic working papers) 708, Bank of Italy, Economic Research and International Relations Area.
  2. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
  3. Michael T. Kiley, 2007. "Is Moderate-to-High Inflation Inherently Unstable?," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 173-201, June.
  4. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850.
  5. repec:sae:niesru:v:164:y::i:1:p:100-109 is not listed on IDEAS
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