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Estimating a high-frequency New Keynesian Phillips curve

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  • Ahrens, Steffen
  • Sacht, Stephen
Abstract
This paper estimates a high-frequency New Keynesian Phillips curve via the Generalized Method of Moments. Allowing for higher-than-usual frequencies strongly mitigates the well-known problems of small-sample bias and structural breaks. Applying a daily frequency allows us to obtain estimates for the Calvo parameter of nominal rigidity over a very short period - for instance for the recent financial and economic crisis - which can then be easily transformed into their monthly and quarterly equivalences and be employed for the analysis of monetary and fiscal policy. With Argentine data from the end of 2007 to the beginning of 2011, we estimate the daily Calvo parameter and find that on average, prices remain fixed for approximately two to three months which is in line with recent microeconomic evidence.

Suggested Citation

  • Ahrens, Steffen & Sacht, Stephen, 2011. "Estimating a high-frequency New Keynesian Phillips curve," Economics Working Papers 2011-08, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:201108
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    Cited by:

    1. Yazgan M. Ege & Yilmazkuday Hakan, 2005. "Inflation Dynamics of Turkey: A Structural Estimation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-15, March.
    2. Kukacka, Jiri & Sacht, Stephen, 2023. "Estimation of heuristic switching in behavioral macroeconomic models," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    3. Tae-Seok Jang & Stephen Sacht, 2016. "Animal Spirits and the Business Cycle: Empirical Evidence from Moment Matching," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 76-113, February.
    4. Franke, Reiner & Jang, Tae-Seok & Sacht, Stephen, 2015. "Moment matching versus Bayesian estimation: Backward-looking behaviour in a New-Keynesian baseline model," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 126-154.
    5. Lis, Eliza & Nickel, Christiane & Papetti, Andrea, 2020. "Demographics and inflation in the euro area: a two-sector new Keynesian perspective," Working Paper Series 2382, European Central Bank.

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    More about this item

    Keywords

    Calvo Staggering; High-Frequency NKM; GMM;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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