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A number of researchers have recently argued that the new-Keynesian Phillips curve matches the empirical behavior of inflation well when the labor income share is used as a driving variable, but fits poorly when deterministically detrended output is used. The theoretical motivation for these...
Persistent link: https://www.econbiz.de/10009475720
Observations that the Phillips curve may be deviating from historical norms are important to policymakers because deviations would imply that more or less output has to be sacrificed to achieve a permanent reduction in long-term inflation. But we argue that recent economic shocks and a shift in...
Persistent link: https://www.econbiz.de/10005512900
I estimate sticky-price and sticky-information models of price setting for the United States via maximum-likelihood techniques, reaching several conclusions. First, the sticky-price model fits best, and captures inflation dynamics as well as reduced-form equations once hybrid-behavior is...
Persistent link: https://www.econbiz.de/10005513114
The New Keynesian Phillips curve (NKPC) asserts that inflation depends on expectations of real marginal costs, but empirical research has shown that purely forward-looking versions of the model generate too little inflation persistence. In this paper, we offer a resolution of the persistence...
Persistent link: https://www.econbiz.de/10005526285
There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980’s. In particular, inflation persistence has declined sharply. The paper demonstrates that this decline is consistent with a standard Dynamic New Keynesian (DNK) model in...
Persistent link: https://www.econbiz.de/10005526610
A much debated question among economists is the usefulness of the Phillips curve as a tool for forecasting inflation. This Economic Letter presents some quantitative comparisons between a Phillips curve-based inflation forecast and an alternative forecast that is constructed as a weighted moving...
Persistent link: https://www.econbiz.de/10005490409
Persistent link: https://www.econbiz.de/10005490590
This Economic Letter looks at the problems with the NKPC and discusses some alternatives that are increasingly being used to think about inflation and the monetary policy transmission mechanism.
Persistent link: https://www.econbiz.de/10005490666
Gali and Gertler (1999) are the first to find that the baseline sticky price model fits the U.S. data well. I examine the robustness of their estimates along two dimensions. First, I show that their IV estimates are not robust to an alternative normalization of the moment condition being...
Persistent link: https://www.econbiz.de/10005498721
One of the criticisms routinely advanced against models of the business cycle with staggered contracts is their inability to generate inflation persistence. This paper finds that staggered Taylor contracts are, in fact, capable of reproducing the inflation persistence implied by U.S. data....
Persistent link: https://www.econbiz.de/10005498773