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Inflation expectations and the structure of the New-Keynesian Phillips Curve

Author

Listed:
  • Olivier Musy

    (OEP - Organisation et Efficacité de Production - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

  • Sébastien Pommier

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

We extend the analysis of Ball (2000) on near-rational expectations. We show that near-rational expectations imply nontrivial additional forecast errors and the degree of error depends on the monetary regime. Moreover, this scheme of expectations does not by itself give support to the New Keynesian Phillips Curve but only to the version built on the staggered prices model of Taylor 1980). The standard model of Calvo 1983 is rejected both under rational expectations and under near-rational expectations in the sense of Ball (2000).
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Olivier Musy & Sébastien Pommier, 2007. "Inflation expectations and the structure of the New-Keynesian Phillips Curve," Post-Print halshs-00421364, HAL.
    • Handle: RePEc:hal:journl:halshs-00421364
    DOI: 10.1080/13504850500425592
    as

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    References listed on IDEAS

    as
    1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    2. West, Kenneth D, 1996. "Asymptotic Inference about Predictive Ability," Econometrica, Econometric Society, vol. 64(5), pages 1067-1084, September.
    3. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    5. Laurence Ball, 2000. "Near-rationality and inflation in two monetary regimes," Proceedings, Federal Reserve Bank of San Francisco.
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