New Tests of the New-Keynesian Phillips Curve

Rudd, Jeremy; Whelan, Karl
January 2001
Working Papers -- U.S. Federal Reserve Board's Finance & Economi;2001, p1
Working Paper
Working Paper
This paper examines lags in inflation regressions. Prior studies used instrumental variables techniques to estimate hybrid specifications for inflation that allow for effects of lagged and future inflation. The authors show that tests of forward-looking behavior have low power against alternative, but non-nested, backward-looking specifications. They demonstrate that results previously interpreted as evidence for the new-Keynesian model are also consistent with a backward-looking Phillips curve. The authors also present alternative tests that find very limited role for forward-looking expectations. This working paper is available at the US Federal Reserve Board. You can access this site by going to www.federalreserve.gov/pubs/workingpapers.htm.


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