scholarly journals Inflation and Marginal Costs in Open Economies: The New Keynesian Hybrid Phillips Curve

2021 ◽  
Author(s):  
Doğaç Acaroğlu ◽  
Kenan Terzioğlu
Keyword(s):  
Linear Regression ◽  
Phillips Curve ◽  
New Keynesian ◽  
Wage Determination ◽  
Output Gap ◽  
Linear Regression Method ◽  
Fuzzy Linear Regression ◽  
Monetary Policies ◽  
Marginal Costs ◽  
Expected Inflation

The inclusion of the inflation rate in wage determination affects the behavior of economic actors and also positions the expected inflation as one of the main factors in determining inflation. Changes in currency parities in developing countries, which make their production dependent on imports, affect costs and prices. Moreover, changes in labor market structures resulting from free capital flows affect employment and the inflation phenomenon. This paper analyzes the current inflation, expected inflation, and output gap relations with the fuzzy linear regression method in the context of the Turkish economy, which has inflation and effective external dependency. Based on the results obtained using marginal cost instead of the output gap, policy recommendations are provided. The scope of this paper comprises the New Keynesian Hybrid Phillips curve that includes external factors. The relationship between inflation and relevant variables is statistically significant and positive, proving the fuzzy linear regression results as promising. To obtain economic stability and policy precautions, we must examine whether the use of tight monetary policies for coping with inflation leads to unemployment and whether expansionist monetary policies lead to inflation.

scholarly journals Inflation, its volatility and the inflation-growth tradeoff in India

2015 ◽  
Vol 10 (3) ◽  
pp. 350-361 ◽  
Author(s):  
Raghbendra Jha ◽  
Varsha S. Kulkarni
Keyword(s):  
Phillips Curve ◽  
Ordinary Least Squares ◽  
New Keynesian ◽  
Recent Analysis ◽  
Output Gap ◽  
Content Type ◽  
Inflation Volatility ◽  
Expected Inflation ◽  
The Usa ◽  
Inflation Variability

Purpose – The purpose of this paper is to amend the New Keynesian Phillips Curve (NKPC) model to include inflation volatility. It provides results on the determinants of inflation volatility and expected inflation volatility for ordinary least squares and autoregressive distributed lags (1,1) models and for change in inflation volatility and change in expected inflation volatility using error correction mechanism (ECM) models. Output gap affects change in expected inflation volatility alone (in the ECM model) and not in the other models. Major determinants of inflation volatility and expected inflation volatility are identified. To the best of the authors knowledge this is the first paper to augment the NKPC to include inflation volatility. Design/methodology/approach – Recent analysis has indicated the importance of inflation volatility for the monetary transmission mechanism in India (Kapur and Behera, 2012). In the analysis of such monetary policy mechanisms the NKPC has proved to be a useful tool. Thus Patra and Ray (2010) for India and Brissimis and Magginas (2008) for the USA find considerable support for the standard NKPC. The purpose of this paper is to synthesize and integrate these two models by extending the standard NKPC framework to include inflation volatility and test its significance for the case of India. Findings – In the case of inflation volatility output gap, lagged output gap and lagged inflation volatility are all insignificant. The level of inflation has a negative significant impact whereas the level of expected inflation has a positive and significant impact. In the case of expected inflation volatility lagged output gap has a negative and significant impact, the price level has a positive and significant impact whereas expected price has a negative and weakly significant impact. ECM reveals change in inflation variability falls significantly with lagged inflation volatility and lagged inflation and less significantly with change in expected inflation. It rises with lagged expected inflation although the coefficient is only weakly significant. Lagged output gap and change in output gap are insignificant. Originality/value – This paper makes two original contributions. First, it extends the New Keynesian framework to include inflation volatility. Second, it estimates this model for India. To the best of the authors knowledge this is the first paper to make these contributions.

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Hardik A. Marfatia
Keyword(s):  
Phillips Curve ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Phillips Curve ◽  
Indexed Bonds ◽  
Unobserved Component ◽  
Expected Inflation ◽  
Component Approach ◽  
Unobserved Component Model ◽  
The Uk

Abstract This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates – the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.

Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective

2019 ◽  
Vol 8 (2) ◽  
pp. 144-179 ◽  
Author(s):  
Bhavesh Salunkhe ◽  
Anuradha Patnaik
Keyword(s):  
Price Index ◽  
Phillips Curve ◽  
Consumer Price Index ◽  
Wholesale Price ◽  
New Keynesian ◽  
Real Effective Exchange Rate ◽  
Output Gap ◽  
Moderate Degree ◽  
New Keynesian Phillips Curve ◽  
Price Inflation

The present study estimates various specifications of the New Keynesian Phillips Curve (NKPC) models for India over 1996Q2 to 2017Q2 using Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation, separately. The empirical results suggest that the data support all the specifications of the Phillips curve models based on both the CPI and WPI inflations. However, the backward looking and hybrid models provide robust results for both the inflation indices. While the forward-looking behaviour dominates the CPI inflation trajectory, the backward-looking behaviour greatly influences the trajectory of WPI inflation. Also, a small-to-moderate degree of persistence is evident in both the CPI and WPI inflation. The output gap, which mainly represents the demand side pressures, turns up the major force determining both the CPI and WPI inflations. Besides the output gap, real effective exchange rate (reer), international crude oil price inflation, global non-fuel commodity price inflation and rainfall have a modest impact on the CPI and WPI inflations. JEL Classification: E12, E52, C36, C14

scholarly journals Fuzzy Linear Regression Method in Ultratrace Analysis and Analytical Interpretation.

1996 ◽  
Vol 12 (3) ◽  
pp. 385-391
Author(s):  
Takuya SHIMOSAKA ◽  
Takehiko KITAMORI ◽  
Akira HARATA ◽  
Tsuguo SAWAD
Keyword(s):  
Linear Regression ◽  
Regression Method ◽  
Linear Regression Method ◽  
Fuzzy Linear Regression ◽  
Ultratrace Analysis

Dose-response assessment by a fuzzy linear-regression method

2001 ◽  
Vol 43 (2) ◽  
pp. 133-140 ◽  
Author(s):  
Y. W. Lee ◽  
S. Y. Chung ◽  
I. Bogardi ◽  
M. F. Dahab ◽  
S. E. Oh
Keyword(s):  
Linear Regression ◽  
Dose Response ◽  
Health Effect ◽  
Response Assessment ◽  
Exposure Dose ◽  
Linear Regression Method ◽  
Fuzzy Linear Regression ◽  
Response Data ◽  
Nitrate Dose ◽  
The Relationship

Regression analysis has been used to characterize the relationship between an exposure dose and the incidence of an adverse health effect such as cancer. However, the regression rarely describes the true relationship due to uncertainties in dose-response data and relationships. Therefore, a method is developed to perform dose-response assessments by a fuzzy linear regression which explicitly exhibit these uncertainties. This method is applied to define the relationship between a particular nitrate dose to humans and its corresponding cancer risk.

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.

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