Time series estimates of the US new Keynesian Phillips curve with structural breaks

B. Rao and Antonio Paradiso ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses recent US data to estimate the new Keynesian Phillips curve (NKPC) with three modifications. Firstly, the variables in the NKPC are found to be nonstationary. Therefore, it is estimated with the time series methods and the cointegrating equations are tested for structural breaks. Secondly, inflationary expectations are proxied with the survey data. Thirdly, unlike in the hybrid NKPC, the effects of the lagged inflation rates are introduced into the dynamic adjustment equations. This offers an opportunity to estimate these dynamic effects with a more general specification instead of the restricted partial adjustment mechanism underlying the hybrid NKPC. Our NKPC, with these changes, is consistent with its underlying micro foundations and forward looking expectations. The results of our NKPC can explain the dynamics of the US inflation rate as well as any other alternative model.

Keywords: US New Keynesian Phillips Curve; Forward looking expectations; Survey data; Wage share; Cointegration (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2011-01-20
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/28413/1/MPRA_paper_28413.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28413

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().