International evidence on the new Keynesian Phillips Curve using aggregate and disaggregate data

Joseph Paul Byrne, Alexandros Kontonikas, Alberto Montagnoli

Research output: Working paperDiscussion paper

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Abstract

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.
Original languageEnglish
PublisherAdam Smith Business School, University of Glasgow
Number of pages36
Publication statusPublished - 9 Jul 2010

Publication series

NameEconomics Working Papers
No.2010_18

Keywords

  • New Keynesian Phillips Curve
  • Heterogeneity
  • Aggregation Bias

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