Inflation Dynamics and the New Keynesian Phillips Curve: An Identification-Robust Econometric Analysis

Jean-Marie Dufour, Lynda Khalaf & Maral Kichian
The authors use identification-robust methods to assess the empirical adequacy of a New Keynesian Phillips curve (NKPC) equation. They focus on Galí and Gertler's (1999) specification, for both U.S. and Canadian data. Two variants of the model are studied: one based on a rational-expectations assumption, and a modification to the latter that uses survey data on inflation expectations. The results based on these two specifications exhibit sharp differences concerning: (i) identification difficulties, (ii) backward-looking behaviour,...
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