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The New Keynesian Phillips Curve: Some Counterfactual Evidence

  • Juan Paez-Farrell

    (Hull University & Julian Hodge Institute for Applied Macroeconomics)

New Keynesian models of the business cycle have become the new paradigm of monetary economics, often used for policy analysis. This paper shows that this class of models fail in one crucial respect: they imply a strong negative contemporaneous correlation between inflation and output. Furthermore, this result is robust to parameter values and specification of the inflation equation.

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File URL: http://econwpa.repec.org/eps/mac/papers/0312/0312003.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0312003.

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Length: 16 pages
Date of creation: 05 Dec 2003
Date of revision:
Handle: RePEc:wpa:wuwpma:0312003
Note: Type of Document - ; pages: 16
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Martin Ellison & Andrew Scott, 2001. "Sticky prices and volatile output," Bank of England working papers 127, Bank of England.
  2. Casares, M., 2001. "Business Cycle and Monetary Policy Analysis in a Structural Sticky-Price of the Euro Area," Papers 49, Quebec a Montreal - Recherche en gestion.
  3. Edward Nelson & Kalin Nikolov, 2002. "Monetary policy and stagflation in the UK," Bank of England working papers 155, Bank of England.
  4. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," Working Papers 97-32, C.V. Starr Center for Applied Economics, New York University.
  5. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  6. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Casares, Miguel, 2001. "Business cycle and monetary policy analysis in a structural sticky-price model of the euro area," Working Paper Series 0049, European Central Bank.
  8. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
  9. Hasan Bakhshi & Jens Larsen, 2001. "Investment-specific technological progress in the United Kingdom," Bank of England working papers 129, Bank of England.
  10. Shamik Dhar & Stephen P Millard, 2000. "A limited participation model of the monetary transmission mechanism in the United Kingdom," Bank of England working papers 117, Bank of England.
  11. Casares, Miguel & McCallum, Bennett T., 2006. "An optimizing IS-LM framework with endogenous investment," Journal of Macroeconomics, Elsevier, vol. 28(4), pages 621-644, December.
  12. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  13. Bennett T. McCallum, 1999. "Analysis of the Monetary Transmission Mechanism: Methodological Issues," NBER Working Papers 7395, National Bureau of Economic Research, Inc.
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