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dc.contributor.authorSTÖLTING, Sarah
dc.contributor.authorKUESTER, Keith
dc.contributor.authorMÜLLER, Gernot J.
dc.date.accessioned2009-07-28T14:06:32Z
dc.date.available2009-07-28T14:06:32Z
dc.date.issued2007
dc.identifier.urihttps://hdl.handle.net/1814/12194
dc.description.abstractMacroeconomic data suggest that the New Keynesian Phillips curve is quite flat - despite microeconomic evidence implying frequent price adjustments. While real rigidities may help to account for the conflicting evidence, we propose an alternative explanation: if price markup/cost-push shocks are persistent and negatively correlated with the labor share, the latter being a widely used measure for marginal costs, the estimated pass-through of measured marginal costs into inflation is limited, even if prices are fairly flexible. Using a standard New Keynesian model, we show that the GMM approach to the New Keynesian Phillips curve leads to inconsistent and upward biased estimates if cost-push shocks indeed are persistent. Monte Carlo experiments suggest that the bias is quite sizeable: we find average price durations estimated as high as 12 quarters, when the true value is about 2 quarters. Moreover, alternative estimators appear to be biased as well, while standard diagnostic tests fail to signal a misspecification of the model.en
dc.language.isoenen
dc.relation.ispartofseriesECB Working Paperen
dc.relation.ispartofseries809en
dc.titleIs the New Keynesian Phillips Curve Flat?en
dc.typeWorking Paperen
dc.neeo.contributorSTÖLTING|Sarah|aut|
dc.neeo.contributorKUESTER|Keith|aut|
dc.neeo.contributorMULLER|Gernot J.|aut|
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