Productivity shocks and the New Keynesian Phillips Curve: Evidence from US and Euro area

Gene Ambrocio and Tae-Seok Jang

No 453, Kiel Advanced Studies Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper seeks to understand dynamics of inflation and marginal cost (labor share) in models that account for the inclusion of productivity shocks in standard New Keynesian Phillips Curve (NKPC). The question of interest is on the empirical importance of and whether productivity shocks shift the Phillips curve using U.S. and Euro area data. Highlighting the inclusion of productivity growth, we employ a hybrid model specification augmented with a productivity term. The model is estimated using the Generalized Method of Moments (GMM) following Gali and Gertler (1999). Our main finding is that a simple extension of the baseline and hybrid models using more recent data (2006:Q4 for the US and 2005:Q4 for the Euro area) yield less convincing results than the previous literature. Furthermore, our estimation results provide some support for the inclusion of productivity growth particularly for the US. We conclude that a better understanding of the inflation-unemployment tradeoff requires accounting for shifts in the Phillips Curve due to productivity shocks.

Keywords: New Keynesian; Phillips Curve; Productivity Growth; GMM (search for similar items in EconPapers)
JEL-codes: E24 E31 J3 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/37137/1/608238732.pdf (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:zbw:ifwasw:453

Access Statistics for this paper

More papers in Kiel Advanced Studies Working Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().