Time series estimates of the US new Keynesian Phillips curve with structural breaks Report as inadecuate




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Abstract

This paper uses recent US data to estimate the new Keynesian Phillips curve NKPC with three modifications. Firstly, the variables in the NKPC are found to be nonstationary. Therefore, it is estimated with the time series methods and the cointegrating equations are tested for structural breaks. Secondly, inflationary expectations are proxied with the survey data. Thirdly, unlike in the hybrid NKPC, the effects of the lagged inflation rates are introduced into the dynamic adjustment equations. This offers an opportunity to estimate these dynamic effects with a more general specification instead of the restricted partial adjustment mechanism underlying the hybrid NKPC. Our NKPC, with these changes, is consistent with its underlying micro foundations and forward looking expectations. The results of our NKPC can explain the dynamics of the US inflation rate as well as any other alternative model.



Item Type: MPRA Paper -

Original Title: Time series estimates of the US new Keynesian Phillips curve with structural breaks-

Language: English-

Keywords: US New Keynesian Phillips Curve, Forward looking expectations, Survey data, Wage share, Cointegration-

Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation-





Author: Rao, B. Bhaskara

Source: https://mpra.ub.uni-muenchen.de/28413/







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