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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

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 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)
Pages: 54
Date: 2021-03-17
New Economics Papers: this item is included in nep-cba, nep-cwa and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:90294

DOI: 10.21034/wp.778

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