We present a unique empirical analysis of the properties of the New Keynesian Phillips Curve using an international dataset of aggregate and disaggregate sectoral inflation. Our results from panel time-series estimation clearly indicate that sectoral heterogeneity has important consequences for aggregate inflation behaviour. Heterogeneity helps to explain the overesti- mation of inflation persistence and underestimation of the role of marginal costs in empirical investigations of the NKPC that use aggregate data. We find that combining disaggregate information with heterogeneous-consistent estimation techniques helps to reconcile, to a large extent, the NKPC with the data.
|Publisher||Adam Smith Business School, University of Glasgow|
|Number of pages||36|
|Publication status||Published - 9 Jul 2010|
|Name||Economics Working Papers|
- New Keynesian Phillips Curve
- Aggregation Bias
Byrne, J. P., Kontonikas, A., & Montagnoli, A. (2010). International evidence on the new Keynesian Phillips Curve using aggregate and disaggregate data. (Economics Working Papers; No. 2010_18). Adam Smith Business School, University of Glasgow.