Testing the New Keynesian Phillips curve

Gunnar Bårdsen, Eilev Jansen and Ragnar Nymoen ()

No 18/2002, Memorandum from Oslo University, Department of Economics

Abstract: The dynamic properties of the The New Keynesian Phillips curve (NPC) is analysed within the framework of a small system of linear di.erence equations.We evaluate the empirical results of existing studies which uses ‘Euroland’ and US data. The debate has been centered around the goodness-of-fit, but this is a weak criterion since the NPC-fit is typically well approximated by purely statistical models (e.g., a random walk). Several other parametric tests are then considered, and the importance of modelling a system that includes the forcing variables as well as the rate of inflation is emphasized. We also highlight the role of existing studies in providing new information relative to that which underlies the typical NPC. This encompassing approach is applied to open economy versions of the NPC for UK and Norway.

Keywords: New Keynesian Phillips curves; US inflation; Euro inflation; UK inflation; Norwegian inflation; Monetary policy; Dynamic stability conditions; Evaluation; Encompassing tests (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 E31 E52 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2003-06-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Forthcoming in Oxford Bulletin of Economics and Statistics, 2004.

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