Regime Shifts and the Stability of Backward Looking Phillips Curves in Open Economies

Macroeconomics from University Library of Munich, Germany

Abstract: In this paper we assess the stability of open economy backward-looking Phillips curves estimated over two different exchange rate regimes. The pseudo-data employed in our econometric exercise come from the simulation of a New-Keynesian hybrid model suited for performing monetary policy analysis. Two main results arise: i) in most of the simulated scenarios the estimated reduced-form Phillips curves turn out to be unstable. However, if the structural new-keynesian model is predominantly - even if not fully - backward-looking, the estimated reduced-form parameters are stable; ii) the Chow-breakpoint test tends to underestimate the importance of regime-shifts in small samples.

Keywords: Lucas Critique; forwardness; backward looking Phillips curves; exchange rates; Chow test. (search for similar items in EconPapers)
JEL-codes: E17 E52 F41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-06-28
New Economics Papers: this item is included in nep-ifn and nep-mac
Note: Type of Document - pdf; pages: 21
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https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0506/0506017.pdf (application/pdf)

Related works:
Working Paper: Regime Shifts and the Stability of Backward Looking Phillips Curves in Open Economies (2010)
Journal Article: Regime shifts and the stability of backward-looking Phillips curves in open economies (2008)
Working Paper: Regime Shifts and the Stability of Backward Looking Phillips Curves in Open Economies (2006)
Working Paper: Regime Shifts and the Stability of Backward Looking Phillips Curves in Open Economies (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0506017

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