scholarly journals New Keynesian Phillips Curve for Pakistan

2007 ◽  
Vol 46 (4II) ◽  
pp. 395-404 ◽  
Author(s):  
Ahsan Ul Haq Satti ◽  
Wasim Shahid Malik ◽  
Ghulam Saghir
Keyword(s):  
Imperfect Competition ◽  
Rational Expectations ◽  
Phillips Curve ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
New Keynesian Phillips Curve ◽  
Business Cycle Theory ◽  
The Standard Model ◽  
Dynamic Stochastic ◽  
Micro Foundations

Recently macroeconomists have moved to a new neo-classical synthesis by integrating Keynesian features like imperfect competition and nominal rigidities with dynamic stochastic general equilibrium model of the Real Business Cycle Theory with micro foundations and rational expectations, [see, for instance, McCallum and Nelson (1999)]. The standard model comprises of a trinity; consumption and inflation adjustment equations with a monetary authority’s reaction function. One of the pillar of the modelinflation adjustment equation, also known as New Keynesian Phillips Curve (NKPC) in the literature, has at least two important features; unlike the traditional Phillips curve the NKPC is forward-looking; and it has been derived from the profit maximising behaviour of the firms in a monopolistically competitive market structure.

scholarly journals Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?

2006 ◽  
Vol 96 (1) ◽  
pp. 303-320 ◽  
Author(s):  
Jeremy Rudd ◽  
Karl Whelan
Keyword(s):  
Closed Form ◽  
Empirical Evidence ◽  
Hybrid Model ◽  
Rational Expectations ◽  
Phillips Curve ◽  
New Keynesian ◽  
Output Gap ◽  
New Keynesian Phillips Curve ◽  
Inflation Dynamics ◽  
Forward Looking

The canonical inflation specification in sticky-price rational expectations models (the new-Keynesian Phillips curve) is often criticized for failing to account for the dependence of inflation on its own lags. In response, many studies employ a “hybrid” specification in which inflation depends on its lagged and expected future values, together with a driving variable such as the output gap. We consider some simple tests of the hybrid model that are derived from its closed form. We find that the hybrid model describes inflation dynamics poorly, and find little empirical evidence for the type of rational, forward-looking behavior that the model implies.

scholarly journals THE MISSPECIFICATION OF EXPECTATIONS IN NEW KEYNESIAN MODELS: A DSGE-VAR APPROACH

2017 ◽  
Vol 23 (3) ◽  
pp. 974-1007 ◽  
Author(s):  
Stephen J. Cole ◽  
Fabio Milani
Keyword(s):  
Rational Expectations ◽  
Model Misspecification ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
Dynamic Interactions ◽  
Expectations Hypothesis ◽  
Expectations Formation ◽  
Keynesian Model ◽  
New Keynesian Models ◽  
Dynamic Stochastic

This paper tests the ability of New Keynesian models to match the data regarding a key channel for monetary transmission: the dynamic interactions between macroeconomic variables and their corresponding expectations. We exploit survey expectations data and adopt a dynamic stochastic general equilibrium (DSGE)-VAR approach to assess the extent and sources of model misspecification. The results point to serious misspecification in the expectations-formation side of the DSGE model. The rational expectations hypothesis is primarily responsible for the model's failure to capture the co-movements between observed macroeconomic expectations and realizations. Alternative models of expectations formation help partially reconcile the New Keynesian model with the data.

scholarly journals Movement of Inflation and New Keynesian Phillips Curve in ASEAN

Economies ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 34
Author(s):  
Adhitya Wardhono ◽  
M. Abd. Nasir ◽  
Ciplis Gema Qori’ah ◽  
Yulia Indrawati
Keyword(s):  
Inflation Rate ◽  
Phillips Curve ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Phillips Curve ◽  
Method Of Moment ◽  
Inflation Model ◽  
Wage Inflation ◽  
Generalized Method Of Moment ◽  
Forward Looking

The development of the theory of dynamic inflation begins by linking wage inflation and unemployment. In further developments, factor of expectation is classified into inflation model. The study used inflation data is important for ASEAN, because ASEAN is one of the strengths of the international economy. This study analyzes the dynamics of inflation in the ASEAN using framework the New-Keynesian Phillips Curve (NKPC) model. The data used is the quarterly panel data from 5 ASEAN members in the period 2005.QI–2018.QIV. The study of this dynamic inflation applies quarter to quarter inflation data, meaning that the inflation rate is the percentage change in the general price of the current quarter compared to last quarter general price divided by the last quarter. The empirical results are estimated by using the Generalized Method of Moment (GMM), both of the system and first different indicates that the pattern formation of inflation expectations are backward-looking and forward-looking. In addition, the estimated NKPC models show the backward-looking behavior is more dominant than the forward looking. Changes in inflation are not entirely influenced by expectations of inflation in each country. Changes in inflation are also influenced by the output gap, changes in money supply, and exchange rate. Based on the findings of this study, it can be concluded that the NKPC models can explain the dynamics of inflation in each country in the ASEAN region.

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