Identification of New Keynesian Phillips Curves from a Global Perspective

Stephane Dees (), M Hashem Pesaran (), L. Vanessa Smith and Ron P. Smith

Journal of Money, Credit and Banking, 2009, vol. 41, issue 7, pages 1481-1502

Abstract: This paper is concerned with the estimation of New Keynesian Phillips Curves (NKPC) and focuses on two issues: the weak instrument problem and the characterization of the steady states. It proposes some solutions from a global perspective. Using a global vector autoregressive (GVAR) model steady states are estimated as long-horizon expectations and valid instruments are constructed from the global variables as weighted averages. The proposed estimation strategy is illustrated using estimates of the NKPC for eight developed industrial countries. The GVAR generates global factors that are valid instruments and help alleviate the weak instrument problem. The steady states also reflect global influences and any long-run theoretical relationships that might prevail within and across countries in the global economy. The GVAR measure of the steady state performed better than the HP measure, and the use of foreign instruments substantially increased the precision of the estimates of the output coefficient. Copyright (c) 2009 The Ohio State University.

Date: 2009

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2009.00264.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Identification of New Keynesian Phillips Curves from a Global Perspective (2008)
Working Paper: Identification of New Keynesian Phillips Curves from a global perspective (2008)
Working Paper: Identification of New Keynesian Phillips Curves from a Global Perspective (2008)
Working Paper: Identification of New Keynesian Phillips Curves from a Global Perspective (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:mcb:jmoncb:v:41:y:2009:i:7:p:1481-1502

Access Statistics for this article

Journal of Money, Credit and Banking is edited by Pok-Sang Lam, Deborah Lucas, Masao Ogaki and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Series data maintained by Christopher F. Baum ().