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Priors and the Slope of the Phillips Curve

Callum Jones, Mariano Kulish and Juan Pablo Nicolini
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Juan Pablo Nicolini: Federal Reserve Bank of Minneapolis/Universidad Di Tella

No 165, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: The slope of the Phillips curve in New Keynesian models is difficult to estimate using aggregate data. We show that in a Bayesian estimation, the priors placed on the parametersgoverning nominal rigidities significantly influence posterior estimates and thus inferences about the importance of nominal rigidities. Conversely, we show that priors play a negligible role in a New Keynesian model estimated using state-level data. An estimation with state-level data exploits a relatively large panel dataset and removes the influence of endogenous monetary policy

Keywords: Slope of the Phillips curve; priors; Bayesian estimation; state-level data (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2022-08
New Economics Papers: this item is included in nep-dge
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https://rednie.eco.unc.edu.ar/files/DT/165.pdf (application/pdf)

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Working Paper: Priors and the Slope of the Phillips Curve (2021) Downloads
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