We provide new evidence on the fit of the hybrid Phillips curve based on indexation of prices to lagged inflation and trend inflation for the Euro area and the United States over the period 1970-2002. The GMM-West estimates suggest that (i) a full indexation scheme is not data consistent whereas...

This paper presents a new mechanism through which monetary policy rules affect inflation persistence. When assuming that price reset hazard functions are not constant, backward-looking dynamics emerge in the NKPC. This new mechanism makes the traditional demand channel of monetary transmission...

This paper proposes a new econometric framework for estimating trend inflation and the slope of the Phillips curve with a regime-switching model. As a unique aspect of our approach, we assume regimes for the trend inflation at one-percent intervals, and estimate the probability of the trend...

The hybrid New Keynesian Phillips curve has been criticized for lacking a micro-foundation. In this paper, an alternative purely forward-looking model of the Phillips curve is constructed on the basis of a micro-foundation of trend inflation. In addition, another source of output gaps other than...

Previous literature shows that in the presence of staggered price setting, high trend inflation induces not only a large loss in steady-state output relative to its natural rate but also indeterminacy of equilibrium under the Taylor rule. This paper examines the implications of a "smoothed-off"...

The concept of trend inflation is crucial for macroeconomic analysis and policy formulation by central banks. In this paper, we compare measures of trend inflation in Hong Kong estimated by the exclusion and statistical methods. Our findings suggest that the trend inflation estimated by the...

We compare two widely used pricing assumptions in the New-Keynesian literature: the Calvo and Rotemberg price-setting mechanisms. We show that, once trend in?ation is taken into account, the two models are very different. i) The long-run relationship between inflation and output is positive in...

I provide a generalization of Calvo price setting, to include non-overlapping contracts as a special case and embed this in a small DSGE model. The resulting Generalized Phillips Curve (GPC) nests New-Keynesian and Neoclassical versions. I linearize the model around a potentially non-zero trend...

Most macroeconomic models for monetary policy analysis are approximated around a zero inflation steady state, but most central banks target inflation at a rate of about 2 percent. Many economists have recently proposed even higher inflation targets to reduce the incidence of the zero lower bound...