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International evidence on the new Keynesian Phillips Curve using aggregate and disaggregate data

  • Joseph P. Byrne
  • Alexandros Kontonikas
  • Alberto Montagnoli

We present a unique empirical analysis of the properties of the New Keynesian Phillips Curve using an international dataset of aggregate and disaggregate sectoral inflation. Our results from panel time-series estimation clearly indicate that sectoral heterogeneity has important consequences for aggregate inflation behaviour. Heterogeneity helps to explain the overesti- mation of inflation persistence and underestimation of the role of marginal costs in empirical investigations of the NKPC that use aggregate data. We find that combining disaggregate information with heterogeneous-consistent estimation techniques helps to reconcile, to a large extent, the NKPC with the data.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2010_18.

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Date of creation: Jul 2010
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Handle: RePEc:gla:glaewp:2010_18
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