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How New Keynesian is the US Phillips curve?

Author

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  • Ragna Alstadheim

    (Norges Bank (Central Bank of Norway))

Abstract

I provide a generalization of Calvo price setting, to include non-overlapping contracts as a special case and embed this in a small DSGE model. The resulting Generalized Phillips Curve (GPC) nests New-Keynesian and Neoclassical versions. I linearize the model around a potentially non-zero trend in.ation rate, and estimate it on US data using Bayesian methods, allowing for Markov switching in the variances of structural shocks. I find that the Phillips curve is 100% New Keynesian. There is no evidence of either forward or backward indexation. I illustrate that trend in.ation a¤ects the estimation of the Phillips curve.

Suggested Citation

  • Ragna Alstadheim, 2013. "How New Keynesian is the US Phillips curve?," Working Paper 2013/25, Norges Bank.
    • Handle: RePEc:bno:worpap:2013_25
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    File URL: https://www.norges-bank.no/en/news-events/news-publications/Papers/Working-Papers/2013/WP-201325/
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    References listed on IDEAS

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    Cited by:

    1. Alstadheim, Ragna, 2016. "The zero lower bound on the interest rate and a Neoclassical Phillips curve," Journal of Macroeconomics, Elsevier, vol. 47(PA), pages 116-130.
    2. Fabrice Orlandi & Werner Roeger & Anna Thum-Thysen, 2018. "The Return of the European Wage Phillips Curve," European Economy - Discussion Papers 085, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    More about this item

    Keywords

    Phillips curve; neoclassical; indexation; trend inflation; regime switch;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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