Department of Economics and Business Economics

Autoregression-based estimation of the new Keynesian Phillips curve

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  • M. Lanne
  • J. Luoto, FIN-00014 University of Helsinki
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.
Original languageEnglish
JournalJournal of Economic Dynamics and Control
Volume37
Issue3
Pages (from-to)561-570
Number of pages10
ISSN0165-1889
DOIs
Publication statusPublished - 1 Mar 2013

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