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New estimates of the hybrid US Phillips curve

Author

Listed:
  • Rao, B. Bhaskara
  • Cao, Cung

Abstract

This paper examines the validity of Rudd and Whelan’s (2006) critiques of Gali and Gertler’s (1999) hybrid Phillips curve (HYPC) by re-estimating the HYPC using full information maximum likelihood (FIML). We also estimate HYPC with the constraint that the weights for the sum of forward looking and backward looking expectations should be unity. Our results support Rudd and Whelan’s conclusion that the weight for forward looking expectations is insignificant.

Suggested Citation

  • Rao, B. Bhaskara & Cao, Cung, 2010. "New estimates of the hybrid US Phillips curve," MPRA Paper 27528, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27528
    as

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    File URL: https://mpra.ub.uni-muenchen.de/27528/1/MPRA_paper_27528.pdf
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    References listed on IDEAS

    as
    1. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1295-1328.
    2. 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.
    3. Jeremy Rudd & Karl Whelan, 2006. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?," American Economic Review, American Economic Association, vol. 96(1), pages 303-320, March.
    4. Rao, B Bhaskara & Srivastava, Virendra K, 1991. "A Disequilibrium Model of Rational Expectations for the U.K," Economic Journal, Royal Economic Society, vol. 101(407), pages 877-886, July.
    5. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    New Keynesian Phillips Curve; Price Rigidities; FIML Estimation;

    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

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