Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area
This paper addresses the issue of testing the 'hybrid' New Keynesian Phillips curve (NKPC) through vector autoregressive (VAR) systems and likelihood methods, giving special emphasis to the case where the variables are non-stationary. The idea is to use a VAR for both the inflation rate and the explanatory variable(s) to approximate the dynamics of the system and derive testable restrictions. Attention is focused on the 'inexact' formulation of the NKPC. Empirical results over the period 1971-98 show that the NKPC is far from providing a 'good first approximation' of inflation dynamics in the Euro area. Copyright 2008 Blackwell Publishing Ltd and the Department of Economics, University of Oxford.
Year of publication: |
2008
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Authors: | Fanelli, Luca |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 70.2008, 1, p. 53-66
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Publisher: |
Department of Economics |
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