The New Keynesian Phillips curve: lessons from single-equation econometric estimation

The last decade has seen a renewed interest in the Phillips curve that might be an odd awakening for a macroeconomic Rip van Winkle from the 1980s or even the 1990s. It turns out that the New Keynesian Phillips curve (NKPC) is consistent with both the theoretical demands of modern macroeconomics and...

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Bibliographic Details
Published inEconomic quarterly - Federal Reserve Bank of Richmond Vol. 94; no. 4; pp. 361 - 395
Main Authors Nason, James M, Smith, Gregor W
Format Journal Article
LanguageEnglish
Published Richmond Federal Reserve Bank of Richmond 22.09.2008
Subjects
Analysis
Costs
Econometrics
Forecasts and trends
Inflation
Inflation (Economics)
Inflation (Finance)
Inflation rates
Macroeconomics
Market trend/market analysis
Monetary policy
Phillips curve
Present value
Prices
Statistical methods
United States
United States
United States > US
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Summary:The last decade has seen a renewed interest in the Phillips curve that might be an odd awakening for a macroeconomic Rip van Winkle from the 1980s or even the 1990s. It turns out that the New Keynesian Phillips curve (NKPC) is consistent with both the theoretical demands of modern macroeconomics and some key statistical properties of inflation. In fact, the NKPC can take a sufficient number of guises to accommodate a wide range of perspectives on inflation. Yet, putting the NKPC to use for policy analysis requires that it has a good econometric track record in describing actual inflation dynamics. In this article the authors review this record using single-equation statistical methods that study the NKPC on its own. This article outlines single-equation econometric methods for studying the NKPC and offers a progress report on the empirical evidence. Estimates of the NKPC using surveys of forecasts give very different coefficients from those using instrumental variables estimation.
ISSN:1069-7225
2163-4556