Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve

Jordi Galí, Mark Gertler and David Lopez-Salido

No 520, Working Papers from Banco de España

Abstract: Galí and Gertler (1999) developed a hybrid variant of the New Keynesian Phillips curve that relates inflation to real marginal cost, expected future inflation and lagged inflation. GMM estimates of the model suggest that forward looking behavior is dominant: The coefficient on expected future inflation substantially exceeds the coefficient on lagged inflation. While the latter differs significantly from zero, it is quantitatively modest. Several authors have suggested that our results are the product of specification bias or suspect estimation methods. Here we show that these claims are incorrect, and that our results are robust to a variety of estimation procedures, including GMM estimation of the closed form, and nonlinear instrumental variables. Also, as we discuss, many others have obtained very similar results to ours using a systems approach, including FIML techniques. Hence, the conclusions of GG and others regarding the importance of forward looking behavior remain robust.

Pages: 21 pages
Date: 2005-08
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Citations: View citations in EconPapers (367)

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Related works:
Working Paper: Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve (2015)
Journal Article: Robustness of the estimates of the hybrid New Keynesian Phillips curve (2005)
Working Paper: Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0520

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