Download or read book Output Inflation and the New Keynesian Phillips Curve written by Jagjit Chadha and published by . This book was released on 2002 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The New Keynesian Phillips Curve written by Paolo Guarda and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The New Keynesian Phillips curve (NPC) differs from the conventional expectations-augmented Phillips curve in that it is forward-looking and links inflation to a measure of marginal cost instead of unemployment or the output gap. More fundamentally, the NPC is derived from New Keynesian models that combine nominal rigidities with individual optimising behaviour and model-consistent (rational) expectations. Because the NPC is grounded in micro-theory (unlike the conventional expectations-augmented Phillips curve), it is robust to some forms of the Lucas critique and may serve to analyse the impact structural changes such as increased price flexibility may have on inflation. New Keynesian Phillips curve estimates for Luxembourg using the Galí and Gertler (1999) hybrid form suggest that firms change prices often but tend to use backward-looking rules-of-thumb instead of resetting prices optimally using forward-looking expectations. In terms of policy implications, although the results suggest prices in Luxembourg are relatively flexible, the prevalence of backward-looking price setting implies greater inflation persistence and a higher sacrifice ratio attached to disinflationary monetary policy. From the perspective of individual firms, backward-looking price setting may be a rational response in a very small open economy because of its vulnerability to external shocks. Small size and openness plausibly imply higher costs of collecting information and lower benefits from optimal price setting.

Download or read book The new Keynesian Phillips Curve written by Assaf Razin and published by . This book was released on 2001 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.

Download or read book New Tests of the New Keynesian Phillips Curve written by Jeremy Bay Rudd and published by . This book was released on 2001 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Identifying the New Keynesian Phillips Curve written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "Phillips curves are central to discussions of inflation dynamics and monetary policy. New Keynesian Phillips curves describe how past inflation, expected future inflation, and a measure of real marginal cost or an output gap drive the current inflation rate. This paper studies the (potential) weak identification of these curves under generalized methods of moments (GMM) and traces this syndrome to a lack of persistence in either exogenous variables or shocks. The authors employ analytic methods to understand the identification problem in several statistical environments: under strict exogeneity, in a vector autoregression, and in the canonical three-equation, New Keynesian model. Given U.S., U.K., and Canadian data, they revisit the empirical evidence and construct tests and confidence intervals based on exact and pivotal Anderson-Rubin statistics that are robust to weak identification. These tests find little evidence of forward-looking inflation dynamics"--Federal Reserve Bank of Atlanta web site.

Download or read book Can the New Keynesian Phillips Curve Explain Japanese Inflation Dynamics written by Ichiro Muto and published by . This book was released on 2006 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate a New Keynesian Phillips curve (NKPC) for Japan's economy. To obtain a better proxy of real marginal cost (RMC), we correct labor share by incorporating labor adjustment costs, material prices, and real wage rigidity. Our approach is unique in utilizing the information on firms' judgment about the labor gap, which implies the existence of labor adjustment costs. Our results show that the NKPC explains Japanese inflation dynamics quite well if we use the corrected proxy of RMC. Furthermore, we find that Japanese inflation persistence is mostly accounted for by the persistence of RMC itself rather than lagged inflation.--Publisher's description.

Download or read book Is There a Phillips Curve A Full Information Partial Equilibrium Approach written by Mr.Roberto Piazza and published by International Monetary Fund. This book was released on 2018-03-08 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical tests of the New Keynesian Phillips Curve have provided results often inconsistent with microeconomic evidence. To overcome the pitfalls of standard estimations on aggregate data, a Full Information Partial Equilibrium approach is developed to exploit sectoral level data. A model featuring sectoral NKPCs subject to a rich set of shocks is constructed. Necessary and sufficient conditions on the structural parameters are provided to allow sectoral idiosyncratic components to be linearly extracted. Estimation biases are corrected using the model's restrictions on the partial equilibrium propagation of idiosyncratic shocks. An application to the US, Japan and the UK rejects the purely forward looking, labor cost-based NKPC.

Download or read book Inflation Dynamics and the Great Recession written by Laurence M. Ball and published by International Monetary Fund. This book was released on 2011-06-01 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are ussed to predice inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and vairance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations.

Download or read book Unconventional Policy Instruments in the New Keynesian Model written by Zineddine Alla and published by International Monetary Fund. This book was released on 2016-03-10 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the use of unconventional policy instruments in New Keynesian setups in which the ‘divine coincidence’ breaks down. The paper discusses the role of a second instrument and its coordination with conventional interest rate policy, and presents theoretical results on equilibrium determinacy, the inflation bias, the stabilization bias, and the optimal central banker’s preferences when both instruments are available. We show that the use of an unconventional instrument can help reduce the zone of equilibrium indeterminacy and the volatility of the economy. However, in some circumstances, committing not to use the second instrument may be welfare improving (a result akin to Rogoff (1985a) example of counterproductive coordination). We further show that the optimal central banker should be both aggressive against inflation, and interventionist in using the unconventional policy instrument. As long as price setting depends on expectations about the future, there are gains from establishing credibility by using any instrument that affects these expectations.

Download or read book The New Keynesian Phillips Curve sticky Price wage Model in the U S and Japan written by Masaaki Suzuki and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Observed Inflation Forecasts and the New Keynesian Phillips Curve written by Chengsi Zhang and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the empirical success of the New Keynesian Phillips Curve (NKPC) in explaining US inflation when observed measures of inflation expectations are used in conjunction with the output gap. The paper contributes to the literature by addressing the important problem of serial correlation in the stylized NKPC and developing an extended model to account for this serial correlation. Contrary to recent results indicating no role for the output gap, we find it to be a statistically significant driving variable for inflation, with this finding robust to whether the inflation expectations series used relates to individual consumers, professional forecasters or the US Fed.

Download or read book The New Keynesian Phillips Curve in an Emerging Market Economy written by Luis Felipe Céspedes and published by . This book was released on 2005 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Derivation and Estimation of a New Keynesian Phillips Curve in a Small Open Economy written by Karolina Holmberg and published by . This book was released on 2006 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, it has become increasingly common to estimate New Keynesian Phillips curves with a measure of firms' real marginal cost as the real driving variable. It has been argued that this measure is both theoretically and empirically superior to the traditional output gap. In this paper, a marginal-cost based New Keynesian Phillips curve is estimated on Swedish data by means of GMM and Full Information Maximum Likelihood. The results show that with real marginal cost in the structural equation the point estimates generally have the exptected positive sign, which is less frequently the case using the output gap in the Phillips curve equation. This suggests that real marginal cost might be a more adequate real explanatory variable for Swedish inflation than the output gap. However, standard errors in the estimations are large and it is in fact difficult to pin down a statistically significant relationship between either real marginal cost or the output gap and inflation.

Download or read book The New Keynesian Economics and the Output Inflation Trade Off written by Laurence Ball and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to provide evidence supporting new Keynesian theories. We point out a simple prediction of Keynesian models that contradicts other leading macroeconomic theories and show that it holds in actual economies. In doing so, we point out a "new phenomenon" that Keynesian theories "render comprehensible." The prediction we that we test concerns the effects of steady inflation. In Keynesian models, nominal shocks have real effects because nominal prices change infrequently. An increase in the average rate of inflation causes firms to adjust prices more frequently to keep up with the rising price level. In turn, more frequent price changes imply that prices adjust more quickly to nominal shocks, and thus that the shocks have smaller real effects. We test this prediction by examining the relation between average inflation and the size of the real effects of nominal shocks both across countries and over time. We measure the effects of nominal shocks by the slope of the short-run Phillips curve.

Download or read book Monetary Policy Under Neoclassical and New Keynesian Phillips Curves with an Application to Price Level and Inflation Targeting written by Michael T. Kiley and published by . This book was released on 1998 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book New Keynesian Phillips Curve for Estonia Latvia and Lithuania written by Aurelijus Dabusinskas and published by . This book was released on 2007 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The New Keynesian Phillips Curve in an Inflation Targeting Country written by Giray Gozgor and published by . This book was released on 2013 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: The possible short-run trade-off between the inflation (gap) and the output (gap) remains a critical policy issue for any emerging economy; particularly when an implicit or an explicit inflation targeting monetary policy is considered. The New Keynesian Phillips Curve (NKPC) has recently set up a framework on the trade-off between the inflation (gap) and the difference between the actual output and potential (efficient) output under the assumption of real wage rigidities. In this paper, we estimate the NKPC based on this framework for the Turkish economy over a period of implicit and explicit inflation targeting monetary policy. The results from Generalized Methods of Moments (GMM) estimation suggest that empirical findings are consistent with the theoretical background and the parameter restrictions are satisfied.