Journal Article
DSGE model-based estimation of the New Keynesian Phillips curve
Abstract: This paper surveys estimates of New Keynesian Phillips curve (NKPC) parameters that have been obtained by fitting fully specified dynamic stochastic general equilibrium (DSGE) models to U.S. data. We examine various sources of identification in the context of a simple analytical model. DSGE model-based NKPC estimates tend to be fragile and sensitive to the model specification, in particular if marginal costs are treated as an unobserved variable. Estimates of the NKPC slope lie between 0 and 4. If the observations span the labor share, which is in most instances the model-implied measure of marginal costs, then the slope estimates fall into a much narrower range of 0.005 to 0.135. No consensus has emerged with respect to the importance of lagged inflation in the Phillips curve.
Keywords: Inflation (Finance); Phillips curve;
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Bibliographic Information
Provider: Federal Reserve Bank of Richmond
Part of Series: Economic Quarterly
Publication Date: 2008
Volume: 94
Issue: Fall
Pages: 397-433