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Efficient Inference with Time-Varying Information and the New Keynesian Phillips Curve

Author

Listed:
  • Bertille Antoine

    (Simon Fraser University)

  • Otilia Boldea

    (Tilburg University)

Abstract

Decades of empirical evidence suggest that many macroeconometric and financial models are subject to both instability and identification problems. In this paper, we address both issues under the unified framework of time-varying information, which includes changes in instrument strength, changes in the second moment of instruments, and changes in the variance of moment conditions. We develop a new estimation method that exploits these changes to increase the efficiency of the estimates of the (stable) structural parameters. We estimate a New Keynesian Phillips Curve and obtain more precise estimates of the price indexation parameters than standard methods. An extensive simulation study shows that our method delivers substantial efficiency gains in finite samples.

Suggested Citation

  • Bertille Antoine & Otilia Boldea, 2015. "Efficient Inference with Time-Varying Information and the New Keynesian Phillips Curve," Discussion Papers dp15-04, Department of Economics, Simon Fraser University, revised 25 Aug 2016.
  • Handle: RePEc:sfu:sfudps:dp15-04
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    Cited by:

    1. Giraitis, Liudas & Kapetanios, George & Marcellino, Massimiliano, 2021. "Time-varying instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 224(2), pages 394-415.
    2. Rothfelder, Mario & Boldea, Otilia, 2016. "Testing for a Threshold in Models with Endogenous Regressors," Discussion Paper 2016-029, Tilburg University, Center for Economic Research.
    3. Regis Barnichon & Geert Mesters, 2020. "Identifying Modern Macro Equations with Old Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 135(4), pages 2255-2298.
    4. Bertille Antoine & Otilia, 2015. "Inference in linear models with structural changes and mixed identification strength," Discussion Papers dp15-05, Department of Economics, Simon Fraser University.
    5. Alastair R. Hall & Denise R. Osborn & Nikolaos Sakkas, 2017. "The asymptotic behaviour of the residual sum of squares in models with multiple break points," Econometric Reviews, Taylor & Francis Journals, vol. 36(6-9), pages 667-698, October.
    6. Aquino, Juan, 2019. "The Small Open Economy New-Keynesian Phillips Curve: Specification, Structural Breaks and Robustness," Working Papers 2019-019, Banco Central de Reserva del Perú.

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    More about this item

    Keywords

    GMM; Weak instruments; Break point; Change in identification strength;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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