342 research outputs found
ARCH and structural breaks in United States inflation
United States Phillips curves are routinely estimated without accounting for
the shifts in mean inflation. As a result we may expect the standard estimates
of Phillips curves to be biased and suffer from ARCH. We demonstrate this
is indeed the case. We also demonstrate that once the shifts in mean inflation
are accounted for the ARCH is largely eliminated in the estimated model and
the model defining expected rate of inflation in the New Keynesian model
plays no significant role in the dynamics of inflation
The small open-economy New Keynesian Phillips Curve: empirical evidence and implied inflation dynamics
In this paper we apply GMM estimation to assess the relevance of domestic versus external determinants of CPI inflation dynamics in a sample of OECD countries typically classified as open economies. The analysis is based on a variant of the small open-economy New Keynesian Phillips Curve derived in Galà and Monacelli (Rev Econ Stud 72:707–734, 2005), where the novel feature is that expectations about fluctuations in the terms of trade enter explicitly. For most countries in our sample the expected relative change in the terms of trade emerges as the more relevant inflation driver than the contemporaneous domestic output gap
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