Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189310 
Year of Publication: 
2005
Series/Report no.: 
Queen's Economics Department Working Paper No. 1026
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
Phillips curves are central to discussions of inflation dynamics and monetary policy. New Keynesian Phillips curves describe how past inflation, expected future inflation, and a measure of real marginal cost or an output gap drive the current inflation rate. This paper studies the (potential) weak identification of these curves under GMM and traces this syndrome to a lack of persistence in either exogenous variables or shocks. We employ analytic methods to understand the identification problem in several statistical environments: under strict exogeneity, in a vector autoregression, and in the canonical three-equation, New Keynesian model. Given U.S., U.K., and Canadian data, we revisit the empirical evidence and construct tests and confidence intervals based on exact and pivotal Anderson-Rubin statistics that are robust to weak identification. These tests find little evidence of forward-looking inflation dynamics.
Subjects: 
Phillips curve
Keynesian
identification
inflation
JEL: 
E31
C32
Document Type: 
Working Paper

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