Assessing the New Keynesian Phillips Curve Under Competing Expectation Hypotheses

Olivier Musy and Sébastien Pommier

Chapter 3 in Advances in Monetary Policy and Macroeconomics, 2007, pp 28-49 from Palgrave Macmillan

Abstract: Abstract The current research on monetary business cycles introduces sticky prices as a source of monetary non-neutrality, but assumes otherwise that agents adopt an optimizing behaviour and have rational expectations. The main characteristic of the resulting inflation specification (known as the ‘New Keynesian Phillips Curve’, hereafter NKPC) is the dependence of current inflation on expected inflation and a measure of the output gap: π t = β E t π t + 1 + α y t ]] π t = α ∑ i = 0 ∞ β i y t + i ]] π t = γ ( L ) π t − 1 + δ ( L ) y t + u t ]]

Keywords: Random Walk; Monetary Policy; Forecast Error; Rational Expectation; Phillips Curve (search for similar items in EconPapers)
Date: 2007
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Working Paper: Assessing the new keynesian Phillips curve under competing expectation hypothesis (2006)
Working Paper: Assessing the new keynesian phillips curves under competing expectation hypothesis (2005)
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DOI: 10.1057/9780230800762_3

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