Testing the New Keynesian Phillips curve through Vector Autoregressive models: Results from the Euro area

Luca Fanelli ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper addresses the issue of testing the 'hybrid' New Keynesian Phillips Curve (NKPC) through Vector Autoregressive (VAR) systems and likelihood methods, giving special emphasis to the case where variables are non stationary. The idea is to use a VAR for both the inflation rate and the explanatory variable(s) to approximate the dynamics of the system and derive testable restrictions. Attention is focused on the 'inexact' formulation of the NKPC. Empirical results over the period 1971-1998 show that the NKPC is far from being a `good first approximation' of inflation dynamics in the Euro area.

Keywords: Inflation dynamics; Forecast model; New Keynesian Phillips Curve; Forward-looking behavior; VAR expectations (search for similar items in EconPapers)
JEL-codes: C32 C52 E31 (search for similar items in EconPapers)
Date: 2005-01, Revised 2007-01
New Economics Papers: this item is included in nep-for, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://mpra.ub.uni-muenchen.de/1617/1/MPRA_paper_1617.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/2380/1/MPRA_paper_2380.pdf revised version (application/pdf)

Related works:
Journal Article: Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area* (2008)
Working Paper: Testing the New Keynesian Phillips Curve through Vector Autoregressive models: Results from the Euro area (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1617

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