Inflation dynamics and the New Keynesian Phillips Curve: an identification robust econometric analysis

Jean-Marie Dufour (), Lynda Khalaf and Maral Kichian

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: In this paper, we use identification-robust methods to assess the empirical adequacy of a New Keynesian Phillips Curve (NKPC) equation. We focus on the Gali and Gertler’s (1999) specification, on both U.S. and Canadian data. Two variants of the model are studied: one based on a rationalexpectations assumption, and a modification to the latter which consists in using survey data on inflation expectations. The results based on these two specifications exhibit sharp differences concerning: (i) identification difficulties, (ii) backward-looking behavior, and (ii) the frequency of price adjustments. Overall, we find that there is some support for the hybrid NKPC for the U.S., whereas the model is not suited to Canada. Our findings underscore the need for employing identificationrobust inference methods in the estimation of expectations-based dynamic macroeconomic relations.

Keywords: macroeconomics; inflation dynamics; New Keynesian Philli Curve; identification robust inference; weak instruments; oimal instruments (search for similar items in EconPapers)
JEL-codes: C12 C13 C3 C52 E3 E31 E5 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://hdl.handle.net/1866/546 (application/pdf)

Related works:
Journal Article: Inflation dynamics and the New Keynesian Phillips Curve: An identification robust econometric analysis (2006)
Working Paper: Inflation Dynamics and the New Keynesian Phillips Curve: An Identification-Robust Econometric Analysis (2005)
Working Paper: Inflation Dynamics and the New Keynesian Phillips Curve: an Identification Robust Econometric Analysis (2005)
Working Paper: Inflation Dynamics and the New Keynesian Phillips Curve: An Identification Robust Econometric Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2005-17

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