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THE NEW KEYNESIAN PHILLIPS CURVE IN A TIME-VARYING COEFFICIENT ENVIRONMENT: SOME EUROPEAN EVIDENCE

Published online by Cambridge University Press:  01 April 2009

George Hondroyiannis ,
P.A.V.B. Swamy  and
George S. Tavlas
George Hondroyiannis
Affiliation:
Bank of Greece and Harokopio University
P.A.V.B. Swamy
Affiliation:
U.S. Bureau of Labor Statistics
George S. Tavlas*
Affiliation:
Bank of Greece
*
Address correspondence to: George Tavlas, Economics Research Department, Bank of Greece, 21, El. Venizelos Ave, 102 50 Athens, Greece; e-mail: gtavlas@bankofgreece.gr.
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Abstract

We examine whether the importance of lagged inflation in the New Keynesian Phillips Curve (NKPC) may be a result of specification biases. NKPCs are estimated for four countries: France, Germany, Italy, and the United Kingdom. Using time-varying coefficient (TVC) estimation, a procedure that can deal with possible specification biases, we find support for the NKPC model that excludes lagged inflation. Our results indicate a Phillips-curve relationship for the countries considered that does not contain an inertial element.

Keywords

New Keynesian Phillips CurveSpecification BiasesTime-Varying Coefficients

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Type
Articles
Information
Macroeconomic Dynamics , Volume 13 , Issue 2 , April 2009 , pp. 149 - 166
Copyright
Copyright © Cambridge University Press 2009

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