The Small Open-Economy New Keynesian Phillips Curve: Empirical Evidence and Implied Inflation Dynamics

Arbeitspapier

This paper applies GMMestimation to assess empirically the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0817

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Evaluation, Validation, and Selection ; Price Level; Inflation; Deflation ; Open Economy Macroeconomics
• Subject: New Keynesian Phillips Curve ; small open economies ; terms of trade fluctuations ; inflation dynamics ; GMM estimation ; New-Keynesian Phillips Curve ; Kleines-offenes-Land ; Theorie ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mihailov, Alexander ; Rumler, Fabio ; Scharler, Johann
• Event: Veröffentlichung
• (who): Johannes Kepler University of Linz, Department of Economics
• (where): Linz
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/73579
• Last update: 10.03.2025, 11:44 AM CET