To refer to this page use:
|Abstract:||We review the main identification strategies and empirical evidence on the role of expectations in the New Keynesian Phillips curve, paying particular attention to the issue of weak identification. Our goal is to provide a clear understanding of the role of expectations that integrates across the different papers and specifications in the literature. We discuss the properties of the various limited-information econometric methods used in the literature and provide explanations of why they produce conflicting results. Using a common dataset and a flexible empirical approach, we find that researchers are faced with substantial specification uncertainty, as different combinations of various a priori reasonable specification choices give rise to a vast set of point estimates. Moreover, given a specification, estimation is subject to considerable sampling uncertainty due to weak identification. We highlight the assumptions that seem to matter most for identification and the configuration of point estimates. We conclude that the literature has reached a limit on how much can be learned about the New Keynesian Phillips curve from aggregate macroeconomic time series. New identification approaches and new datasets are needed to reach an empirical consensus.|
|Citation:||Mavroeidis, Sophocles, Plagborg-Moller, Mikkel, Stock, James H. (2014). Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve. JOURNAL OF ECONOMIC LITERATURE, 52 (1), 124 - 188. doi:10.1257/jel.52.1.124|
|Pages:||124 - 188|
|Type of Material:||Journal Article|
|Journal/Proceeding Title:||JOURNAL OF ECONOMIC LITERATURE|
|Version:||Final published version. Article is made available in OAR by the publisher's permission or policy.|
Items in OAR@Princeton are protected by copyright, with all rights reserved, unless otherwise indicated.