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The empirical relevance of the New Keynesian Phillips curve

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  • Ragnar Nymoen
  • Gunnar Bardsen
  • Eilev S. Jansen

Abstract

The dynamic properties of the The New Keynesian Phillips curve (NPC) is analysed within the framework of a small system of linear difference equations. We evaluate the empirical results of existing studies which uses `Euroland' and US data. The debate has been centered around the goodness-of-fit, but this is a weak criterion since the NPC-fit is typically well approximated by purely statistical models (e.g., a random walk). Several other parametric tests are then considered, and the importance of modelling a system that includes the forcing variables as well as the rate of inflation is emphasized. We also highlight the role of existing studies in providing new information relative to that which underlies the typical NPC. This encompassing approach is applied to open economy versions of the NPC for UK and Norway

Suggested Citation

  • Ragnar Nymoen & Gunnar Bardsen & Eilev S. Jansen, 2004. "The empirical relevance of the New Keynesian Phillips curve," Econometric Society 2004 North American Winter Meetings 328, Econometric Society.
    • Handle: RePEc:ecm:nawm04:328
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    Cited by:

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    2. James M. Nason & Gregor W. Smith, 2008. "Identifying the new Keynesian Phillips curve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 525-551.
    3. Marika Karanassou & Hector Sala & Dennis J. Snower, 2010. "Phillips Curves And Unemployment Dynamics: A Critique And A Holistic Perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 1-51, February.
    4. Snower, Dennis & Karanassou, Marika & Sala, Hector, 2003. "The European Phillips Curve: Does the NAIRU Exist?," CEPR Discussion Papers 4102, C.E.P.R. Discussion Papers.
    5. Marika Karanassou & Dennis J. Snower, 2007. "Inflation Persistence and the Phillips Curve Revisited," Working Papers 586, Queen Mary University of London, School of Economics and Finance.
    6. Karanassou, Marika & Snower, Dennis J., 2007. "Inflation Persistence and the Phillips Curve Revisited," IZA Discussion Papers 2600, Institute of Labor Economics (IZA).
    7. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers 11, Central Bank of Luxembourg.
    8. Karanassou, Marika & Snower, Dennis J., 2007. "Inflation persistence and the Philips curve revisited," Kiel Working Papers 1349, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    New Keynesian Phillips curves; US inflation; Euro inflation; UK inflation; Norwegian inflation; Monetary policy; Dynamic stability conditions; Evaluation; Encompassing tests.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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