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Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve

Author

Listed:
  • Jordi Galí
  • Mark Gertler
  • J. David López-Salido

Abstract

Galí and Gertler (1999) developed a hybrid variation of the New Keynesian Phillips curve that relates inflation to real marginal cost, expected future inflation and lagged inflation. GMM estimates of the model suggest that forward looking behavior is highly important; the coefficient on expected future inflation is large and highly significant. Several authors have argued that our results may be the product of either some form of specification bias or poor estimation methods. Here we show that these claims are incorrect. We show that our results are robust to a variety of estimation procedures, including GMM estimation of the closed form, and nonlinear instrumental variables. Hence the conclusions of GG and others regarding the importance of forward looking behavior appear to be robust.

Suggested Citation

  • Jordi Galí & Mark Gertler & J. David López-Salido, 2003. "Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve," Working Papers 44, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:44
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    References listed on IDEAS

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    More about this item

    Keywords

    Phillips curve; marginal costs; sticky prices;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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