Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73579
Authors: 
Mihailov, Alexander
Rumler, Fabio
Scharler, Johann
Year of Publication: 
2008
Series/Report no.: 
Working Paper, Department of Economics, Johannes Kepler University of Linz 0817
Abstract: 
This paper applies GMMestimation to assess empirically the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies.
Subjects: 
New Keynesian Phillips Curve
small open economies
terms of trade fluctuations
inflation dynamics
GMM estimation
JEL: 
C32
C52
E31
F41
Document Type: 
Working Paper

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