The New Keynesian Phillips Curve in Europe PDF Download

Author: Peter Tillmann
Publisher:
ISBN:
Category :
Languages : en
Pages : 56

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The canonical New Keynesian model specifies inflation.

Author: Maritta Paloviita
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Abstract: This paper examines inflation dynamics in Europe. Econometric specification tests with pooled European data are used to compare the empirical performance of the New Classical, New Keynesian and Hybrid specifications of the Phillips curve. Instead of imposing any specific form of expectations formation, direct measures, ie Consensus Economics survey data are used to proxy economic agents' inflation expectations. According to the results, the New Classical Phillips curve has satisfactory statistical properties. Moreover, the purely forward-looking New Keynesian Phillips curve is clearly outperformed by the New Classical and Hybrid Phillips curves. We interpret our results as indicating that the European inflation process is not purely forward-looking, and inflation cannot instantaneously adjust to changes in expectations. Consequently, even allowing for possible non-rationality in expectations, a lagged inflation term enters the New Keynesian Phillips curve for inflation dynamics in

Author: Marc Kern
Publisher: GRIN Verlag
ISBN: 3668167591
Category : Business & Economics
Languages : en
Pages : 43

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Bachelor Thesis from the year 2015 in the subject Economics - Macro-economics, general, grade: 1,3, University of Frankfurt (Main) (Departement of Money and Macroeconomics), language: English, abstract: This paper investigates the inflation dynamics of Germany, Italy, Finland, the whole Europe Area and the United States, based on a General-Method of Moments (GMM) estimation. The New-Keynesian Model and the Real-Business-Cycle Model are essential for the estimation.

Author: Fabio Rumler
Publisher:
ISBN:
Category : European Union countries
Languages : en
Pages : 56

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Author: Keith Küster
Publisher:
ISBN:
Category :
Languages : en
Pages : 33

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Author: Jordi Galí
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 54

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We provide evidence on the fit of the New Phillips Curve (NPQ for the Euro area over the period 1970-1998, and use it as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two main components, namely, labor productivity and real wages. Some of the findings can be summarized as follows: (a) the NPC fits Euro area data very well, possibly better than U.S. data, (b) the degree of price stickiness implied by the estimates is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to have a stronger forward- looking component (i.e., less inertia) than in the U.S., (d) labor market frictions, as manifested in the behavior of the wage markup, appear to have played a key role in shaping the behavior of marginal costs and, consequently, inflation in Europe.

Author: Laurence M. Ball
Publisher: International Monetary Fund
ISBN: 1455263389
Category : Business & Economics
Languages : en
Pages : 58

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This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are ussed to predice inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and vairance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations.

Author: Assaf Razin
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 28

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The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.

Author: Peter J N Sinclair
Publisher: Routledge
ISBN: 1135179778
Category : Business & Economics
Languages : en
Pages : 240

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Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Author: Jordi Galí
Publisher: Princeton University Press
ISBN: 1400866278
Category : Business & Economics
Languages : en
Pages : 295

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Book Description
The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts