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On the precision of Calvo parameter estimates in structural NKPC models

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

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 9, 1582-1595

Abstract: We study the extent of empirical information that can be obtained from alternative structural New Keynesian inflation equations concerning the average duration of prices in the United States, given that such specifications may be hard to identify. Using four different indexation and real-wage-rigidity-based models, in conjunction with identification-robust econometric methods, we evaluate the precision of Calvo parameter estimates. While results are sensitive to calibration and instrument selection, we find confidence bounds on the average duration of prices that line up with available micro-founded studies, statistically significant coefficients for the forcing variables, and non-zero estimates on the coefficient of lagged inflation.

Keywords: Sticky-price; Calvo; model; Structural; estimation; Weak; identification; Indexation; Real; wage (search for similar items in EconPapers)
Date: 2010
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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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