Priors and the Slope of the Phillips Curve
Callum Jones (),
Mariano Kulish and
Juan Pablo Nicolini ()
No 778, Working Papers from Federal Reserve Bank of Minneapolis
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 parameters governing 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; State-level data; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cwa and nep-mac
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