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Alternative Phillips Curves Models with Endogenous Real-Time Expectations

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  • David Kiefer

Abstract

Originally presented as an empirical regularity, a variety of microeconomic derivations of the Phillips tradeoff between inflation and real output have been developed. Since these new Phillips curve models are expressed in terms of unobserved variables and expectations, we develop estimates of these unobservables using a state space characterization of the short-run political-economic equilibrium. This method is appropriate because it yields recursive forecasts based on contemporaneous information, and because we apply it to a real-time data set in order to accurately measure available information. Although none of the new Phillips curve tested are completely adequate, we find that Calvo’s sticky price formulation provides the best fit for US data. It is inadequate because the estimate coefficient for the driving variable (either the output gap or the marginal cost) is essentially zero

Suggested Citation

  • David Kiefer, 2010. "Alternative Phillips Curves Models with Endogenous Real-Time Expectations," Working Paper Series, Department of Economics, University of Utah 2010_03, University of Utah, Department of Economics.
  • Handle: RePEc:uta:papers:2010_03
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    File URL: http://economics.utah.edu/research/publications/2010_03.pdf
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    References listed on IDEAS

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    1. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 281-295, March.
    2. Eichenbaum, Martin, 1997. "Some Thoughts on Practical Stabilization Policy," American Economic Review, American Economic Association, vol. 87(2), pages 236-239, May.
    3. Martin Feldstein, 2002. "The Role for Discretionary Fiscal Policy in a Low Interest Rate Environment," NBER Working Papers 9203, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    new Phillips curve; microfoundations; real-time data;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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