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Asymmetries in New Keynesian Phillips Curves: Evidence from US Cities

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  • Sonora, Robert

Abstract

Studies of the relationship between national in ation rates and the output gap, as formalized in the New Keynesian Phillips Curve, ignore macroeconomic heterogeneity which exist in dierent parts of the country. This paper investigates dierences in in ation and output across United States cities. The policy implications are dicult to ignore given dierences in production across the country as a whole. Also of interest is identifying the median city-economy in the US. Thus when policy is implemented which city sees the greatest benet of new policy? In addition to considering the standard Phillips relation between inflation and the output gap, I also consider the relationship between inflation and an index of wage costs as suggested in the literature. Preliminary results demonstrate a signicant degree of heterogeneity across cities implying centralized policy prescriptions are helpful for some economies are harmful to others.

Suggested Citation

  • Sonora, Robert, 2010. "Asymmetries in New Keynesian Phillips Curves: Evidence from US Cities," MPRA Paper 24650, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24650
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    File URL: https://mpra.ub.uni-muenchen.de/24650/1/MPRA_paper_24650.pdf
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    References listed on IDEAS

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    1. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
    2. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    3. Jeremy Rudd & Karl Whelan, 2007. "Modeling Inflation Dynamics: A Critical Review of Recent Research," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 155-170, February.
    4. Uhlig, H.F.H.V.S. & Ravn, M., 1997. "On Adjusting the H-P Filter for the Frequency of Observations," Discussion Paper 1997-50, Tilburg University, Center for Economic Research.
    5. Basher Syed A. & Carrion-i-Silvestre Josep Lluís, 2009. "Price Level Convergence, Purchasing Power Parity and Multiple Structural Breaks in Panel Data Analysis: An Application to U.S. Cities," Journal of Time Series Econometrics, De Gruyter, vol. 1(1), pages 1-38, April.
    6. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270.
    7. Gali, Jordi & Gertler, Mark & David Lopez-Salido, J., 2005. "Robustness of the estimates of the hybrid New Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1107-1118, September.
    8. Chen, L. L. & Devereux, J., 2003. "What can US city price data tell us about purchasing power parity?," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 213-222, April.
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    11. Gerald A. Carlino & Robert H. DeFina, 1999. "Do states respond differently to changes in monetary policy?," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 17-27.
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    More about this item

    Keywords

    Inflation Dynamics; New Keynesian Phillips Curve; GMM;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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