How New Keynesian is the US Phillips curve?
- By Ragna Alstadheim
- Working Paper
I provide a generalization of Calvo price setting, to include non-overlapping contracts as a special case and embed this in a small DSGE model. The resulting Generalized Phillips Curve (GPC) nests New-Keynesian and Neoclassical versions. I linearize the model around a potentially non-zero trend inflation rate, and estimate it on US data using Bayesian methods, allowing for Markov switching in the variances of structural shocks. I find that the Phillips curve is 100% New Keynesian. There is no evidence of either forward or backward indexation. I illustrate that trend inflation affects the estimation of the Phillips curve.
Norges Bank’s working papers present research projects and reports that are generally not in their final form. Other analyses by Norges Bank’s economists are also included in the series. The views and conclusions in these documents are those of the authors.
Norges Bank’s Working Papers can also be found in Norges Bank's publication archive, RepEc and BIS Central Bank Research Hub
ISSN 1502-8143 (online)