Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336468 
Year of Publication: 
2025
Series/Report no.: 
Discussion Papers No. 1026
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Building on a New Keynesian rational expectations framework, we develop a structural empirical model that jointly determines the real exchange rate, inflation, and the nominal interest rate in a small open economy. Employing a full-information system design and estimation approach that avoids imposing unduly restrictive a priori parameter constraints, we identify a forward-looking Phillips curve while addressing simultaneity bias. Our empirical findings reveal persistent exchange rate dynamics that diverge from New Keynesian rational expectations but align with prior evidence, suggesting the presence of multiple equilibria.
Subjects: 
New Keynesian Phillips curve
structural time series modeling
simultaneous model design and estimation
simultaneous model estimation
Document Type: 
Working Paper

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