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Autoregression-Based Estimation of the New Keynesian Phillips Curve

Markku Lanne and Jani Luoto

MPRA Paper from University Library of Munich, Germany

Abstract: We propose an estimation method of the new Keynesian Phillips curve (NKPC) based on a univariate noncausal autoregressive model for the inflation rate. By construction, our approach avoids a number of problems related to the GMM estimation of the NKPC. We estimate the hybrid NKPC with quarterly U.S. data (1955:1-2010:3), and both expected future inflation and lagged inflation are found important in determining the inflation rate, with the former clearly dominating. Moreover, inflation persistence turns out to be intrinsic rather than inherited from a persistent driving process.

Keywords: Noncausal time series; Non-Gaussian time series; inflation; Phillips curve (search for similar items in EconPapers)
JEL-codes: C22 C51 E31 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-cba, nep-ecm and nep-mac
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Journal Article: Autoregression-based estimation of the new Keynesian Phillips curve (2013) Downloads
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