TY - JOUR
T1 - The new Keynesian Phillips curve
T2 - From sticky inflation to sticky prices
AU - Zhang, Chengsi
AU - Osborn, Denise R.
AU - Kim, Dong Heon
N1 - Copyright:
Copyright 2011 Elsevier B.V., All rights reserved.
PY - 2008/6
Y1 - 2008/6
N2 - The New Keynesian Phillips Curve (NKPC) model of inflation dynamics based on forward-looking expectations is of great theoretical significance in monetary policy analysis. Empirical studies, however, often find that backward-looking inflation inertia dominates the dynamics of the short-run aggregate supply curve. This inconsistency is examined by investigating multiple structural changes in the NKPC for the U.S. between 1960 and 2005, employing both inflation expectations survey data and a rational expectations approximation. We find that forward-looking behavior plays a smaller role during the high and volatile inflation regime to 1981 than in the subsequent period of moderate inflation, providing empirical support for sticky price models over the last two decades. A break in the intercept of the NKPC is also identified around 2001 and this may be associated with U.S. monetary policy in that period.
AB - The New Keynesian Phillips Curve (NKPC) model of inflation dynamics based on forward-looking expectations is of great theoretical significance in monetary policy analysis. Empirical studies, however, often find that backward-looking inflation inertia dominates the dynamics of the short-run aggregate supply curve. This inconsistency is examined by investigating multiple structural changes in the NKPC for the U.S. between 1960 and 2005, employing both inflation expectations survey data and a rational expectations approximation. We find that forward-looking behavior plays a smaller role during the high and volatile inflation regime to 1981 than in the subsequent period of moderate inflation, providing empirical support for sticky price models over the last two decades. A break in the intercept of the NKPC is also identified around 2001 and this may be associated with U.S. monetary policy in that period.
KW - Inflation survey forecasts
KW - Monetary policy
KW - New Keynesian Phillips Curve
KW - Sticky prices
KW - Structural breaks
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U2 - 10.1111/j.1538-4616.2008.00131.x
DO - 10.1111/j.1538-4616.2008.00131.x
M3 - Article
AN - SCOPUS:43749113567
VL - 40
SP - 667
EP - 699
JO - Journal of Money, Credit and Banking
JF - Journal of Money, Credit and Banking
SN - 0022-2879
IS - 4
ER -