Is There a Phillips Curve? A Full Information Partial Equilibrium Approach

March 9, 2018

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Format: Chicago

Roberto Piazza. Is There a Phillips Curve? A Full Information Partial Equilibrium Approach, (USA: International Monetary Fund, 2018) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Empirical tests of the New Keynesian Phillips Curve have provided results often inconsistent with microeconomic evidence. To overcome the pitfalls of standard estimations on aggregate data, a Full Information Partial Equilibrium approach is developed to exploit sectoral level data. A model featuring sectoral NKPCs subject to a rich set of shocks is constructed. Necessary and sufficient conditions on the structural parameters are provided to allow sectoral idiosyncratic components to be linearly extracted. Estimation biases are corrected using the model's restrictions on the partial equilibrium propagation of idiosyncratic shocks. An application to the US, Japan and the UK rejects the purely forward looking, labor cost-based NKPC.

Subject: Civil society, Economic sectors, Inflation, Labor, Price adjustments, Prices, Sticky prices

Keywords: Civil society, FIPE analysis, FIPE approach, FIPE estimation, FIPE moment, Full Information, Inflation, Inflation gap, Limited Information, Phillips Curve, Price adjustments, Sticky prices, Supply schedule, Time series, WP

Publication Details

Pages:

59
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/044
Stock No:

WPIEA2018044
ISBN:

9781484345207
ISSN:

1018-5941

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