The New Keynesian Phillips Curve revisited

Arbeitspapier

Recently, several authors have questioned the evidence claimed by Galí and Gertler (1999) and Galí, Gertler and López-Salido (2001) that a hybrid version of the New Keynesian Phillips Curve approximates European and US inflation dynamics quite well. We re-examine the evidence using likelihood-based methods. Although including lagged inflation enhances the empirical fit, the improvement is not large enough to yield a model that passes a likelihood ratio test. We also show that the likelihood surface is rather flat, especially in the European case, indicating that the model may be weakly identified as criticised by others using alternative methods.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 500

Classification and Topics

• Classification: Wirtschaft ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection ; Price Level; Inflation; Deflation
• Subject: European and US inflation ; the New Keynesian Phillips Curve ; vector autoregressive models and likelihood ratio tests

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boug, Pål ; Cappelen, Ådne ; Swensen, Anders Rygh
• Event: Veröffentlichung
• (who): Statistics Norway, Research Department
• (where): Oslo
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/192482
• Last update: 10.03.2025, 11:44 AM CET