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Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area *

Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the... 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Oxford Bulletin of Economics & Statistics Wiley

Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area *

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References (82)

Publisher
Wiley
Copyright
Copyright © 2008 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0305-9049
eISSN
1468-0084
DOI
10.1111/j.1468-0084.2007.00490.x
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Oxford Bulletin of Economics & StatisticsWiley

Published: Feb 1, 2008

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