scholarly journals Trend Inflation and the Nature of Structural Breaks in the New Keynesian Phillips Curve

2014 ◽  
Vol 46 (2-3) ◽  
pp. 253-266 ◽  
Author(s):  
CHANG-JIN KIM ◽  
PYM MANOPIMOKE ◽  
CHARLES R. NELSON
Keyword(s):  
Structural Breaks ◽  
Phillips Curve ◽  
New Keynesian ◽  
New Keynesian Phillips Curve ◽  
Trend Inflation

The New Keynesian Phillips curve under trend inflation and strategic complementarity

2007 ◽  
Vol 29 (1) ◽  
pp. 37-59 ◽  
Author(s):  
Hasan Bakhshi ◽  
Hashmat Khan ◽  
Pablo Burriel-Llombart ◽  
Barbara Rudolf
Keyword(s):  
Phillips Curve ◽  
New Keynesian ◽  
New Keynesian Phillips Curve ◽  
Strategic Complementarity ◽  
Trend Inflation

Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve

2008 ◽  
Vol 98 (5) ◽  
pp. 2101-2126 ◽  
Author(s):  
Timothy Cogley ◽  
Argia M Sbordone
Keyword(s):  
Monetary Policy ◽  
Ad Hoc ◽  
Phillips Curve ◽  
New Keynesian ◽  
Time Varying ◽  
New Keynesian Phillips Curve ◽  
Inflation Persistence ◽  
Long Run ◽  
Trend Inflation ◽  
Forward Looking

Purely forward-looking versions of the New Keynesian Phillips curve (NKPC) generate too little inflation persistence. Some authors add ad hoc backward-looking terms to address this shortcoming. We hypothesize that inflation persistence results mainly from variation in the long-run trend component of inflation, which we attribute to shifts in monetary policy. We derive a version of the NKPC that incorporates a time-varying inflation trend and examine whether it explains the dynamics of inflation. When drift in trend inflation is taken into account, a purely forward-looking version of the model fits the data well, and there is no need for backward-looking components. (JEL E12, E31, E52)

INFLATION IN THE G7: MIND THE GAP(S)?

2013 ◽  
Vol 19 (4) ◽  
pp. 883-912 ◽  
Author(s):  
James Morley ◽  
Jeremy Piger ◽  
Robert Rasche
Keyword(s):  
Phillips Curve ◽  
Large Fraction ◽  
Empirical Support ◽  
New Keynesian ◽  
New Keynesian Phillips Curve ◽  
G7 Countries ◽  
Real Activity ◽  
The Real ◽  
Trend Inflation ◽  
Transitory Component

We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory component of inflation, or “inflation gap,” that is driven by the real-activity gap, which we measure as the deviation of unemployment from its natural rate. We find that both trend inflation and the inflation gap have been consistent and substantial determinants of inflation at business cycle horizons for all G7 countries since 1960. Also, the real-activity gap explains a large fraction of the variation in the inflation gap for each country. These results provide empirical support for the New Keynesian Phillips Curve augmented with trend inflation.

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