Estimating the New Keynesian Phillips Curve by Quantile Regression Method for Turkey

ABSTRACT

New Keynesian Phillips Curve based on nominal rigidities and rational expectations is a widely used structural model of inflation dynamics in the analysis of monetary policy. It postulates that current inflation is determined by expected inflation and by the real marginal costs. This study uses the Quantile Regression Method (QRM) to present the New Keynesian Phillips Curve (NKPC) estimation for Turkey instead of Generalized Method of Momentum (GMM). This method identifies differences in response of the inflation to changes in explanatory variables at various points of inflation.

Cite this paper

Ç. Boz, "Estimating the New Keynesian Phillips Curve by Quantile Regression Method for Turkey,"*Modern Economy*, Vol. 4 No. 9, 2013, pp. 627-632. doi: 10.4236/me.2013.49067.

Ç. Boz, "Estimating the New Keynesian Phillips Curve by Quantile Regression Method for Turkey,"

References

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[14] J. Rudd and K. Whelan, “New Tests of The New Keynesian Phillips Curve,” Journal of Monetary Economics, Vol. 52, No. 6, 2005, pp. 1167-1181. doi:10.1016/j.jmoneco.2005.08.006

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[19] J. C. Fuhrer, “The (un)Importance of Forward-Looking Behavior in Price Specifications,” Journal of Money, Credit and Banking, Vol. 29, No. 3, 1997, pp. 338-350. doi:10.2307/2953698

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[21] E. Jondeau and H. Le Bihan, “Testing for The New Keynesian Phillips Curve; Additional International Evidence,” Economic Modelling, Vol. 22, No. 3, 2005, pp. 521-550. doi:10.1016/j.econmod.2004.09.002

[22] S. Henzel and T. Wollmershaeuser, “The New Keynesian Phillips Curve and the Role of Expectations: Evidence From the Ifo World Economic Survey,” CESifo Working Paper, 2006.

[23] A. Carriero, “A Simple Test of the New Keynesian Phillips Curve,” Economic Letters, Vol. 100, No. 2, 2008, pp. 241-244. doi:10.1016/j.econlet.2008.02.012

[24] P. Soderlind, U. Soderstrom and A. Vredin, “Can a Calibrated New-Keynesian Model of Monetary Policy Fit the Facts?” SSE/EFI Working Paper Series in Economics and Finance No. 511, 2002.

[25] F. Jean-Baptiste, “Forecasting with the New Keynesian Phillips Curve: Evidence from Survey Data,” Economic Letters, Vol. 117, No. 3, 2012, pp. 811-813. doi:10.1016/j.econlet.2011.02.034

[26] W. Roeger and B. Herz, “Traditional Versus New Keynesian Phillips Curves; Evidence from Output Effects,” International Journal of Central Banking, 2012, pp. 87-109.

[27] G. Chorteas, G. Magonis and T. Panagiotidis, “The Asymmetry of the New Keynesian Phillips Curve in the Euro-Area,” Economic Letters, Vol. 114, No. 2, 2012, pp. 161-163. doi:10.1016/j.econlet.2011.09.035

[28] M. E. Yazgan and H. Yilmazkuday, “Inflation Dynamics of Turkey: A Structural Estimation,” Studies in Nonlinear Dynamics & Econometrics, Vol. 9, No. 1, 2005, pp. 1-13. doi:10.2202/1558-3708.1228

[29] G. Saz, “The Turkish Phillips Curve Experience and the New Keynesian Phillips Curve: A Conceptualization and Application of a Novel Measure for Marginal Costs,” International Research Journal of Finance and Economics, Vol. 63. 2011, pp. 8-45.

[30] J. M. Nason and G. W. Smith, “The New Keynesian Phillips Curve: Lessons from Single-Equation Econometric Estimation,” Economics Quarterly, Vol. 94, No. 4, 2008, pp. 667-684.

[31] R. Koenker and G. Basset, “Regression Quantiles,” Econometrica, Vol. 46, No. 1, 1978, pp. 33-50. doi:10.2307/1913643

[1] B. Snowdon and H. Vane, “Modern Macroeconomics; Its Origins, Development and Current State,” 2005.

[2] J. Taylor, “Aggregate Dynamics and Staggered Contracts,” The Journal Of Political Economy, Vol. 88, No. 1, 1980, pp. 1-23. doi:10.1086/260845

[3] J. J. Rotemberg, “Monopolisitic Price Adjustment and Aggregate Out-Put,” Review of Economic Studies, Vol. 49, 1982, pp. 517-531. doi:10.2307/2297284

[4] G. Calvo, “Staggered Prices in a Utility Maximizing Framework,” Journal of Monetary Ecoomics, Vol. 12, No. 3, 1983, pp. 383-398. doi:10.1016/0304-3932(83)90060-0

[5] R. Nunes, “Inflation Dynamics: The Role of Expectations,” Journal of Money, Credit and Banking, Vol. 42, No. 6, 2010, pp. 1161-1172. doi:10.1111/j.1538-4616.2010.00324.x

[6] J. Gali and M. Gertler, “Inflation Dynamics: A Structural Econometric Analysis,” Journal of Monetary Economics, Vol. 44, No. 2, 1999, pp. 195-222. doi:10.1016/S0304-3932(99)00023-9

[7] J. Gali, M. Gertler, et al., “European Inflation Dynamics,” Journal of Monetary Economics, Vol. 45, No. 7, 2001, pp. 1237-1270.

[8] J. Gali, M. Gertler, et al., “Robustness of the Estimates of Hybrid New Keynesian Phillips Curve,” Journal of Monetary Economics, Vol. 52, No. 6, 2005, pp. 1107-1118. doi:10.1016/j.jmoneco.2005.08.005

[9] A. Sbordone, “Inflation Persistence: Alternative Interpretations and Policy Implications,” Journal of Monetary Economics, Vol. 54, No. 5, 2007, pp. 1311-1339. doi:10.1016/j.jmoneco.2007.06.007

[10] J. Amato and S. Gerlach, “Inflation Targeting in Emerging Market and Transition Economies, Lessons after a Decade,” Centre for Economic Policy Research, 2001.

[11] J. Fuhrer and M. Gerald, “Inflation Persistence,” Quarterly Journal of Economics, Vol. 110, No. 1, 1995, pp. 127-159. doi:10.2307/2118513

[12] J. Roberts, “Inflation Expectations and the Transmission of Monetary Policy,” Board of Governors of the Federal Reserve System, 1998.

[13] J. Roberts, “How Well Does The New Keynesian Sticky-Price Model Fit the Data?” Federal Rezerve Board FEDS Working Papers, 2001, pp. 1948-1943.

[14] J. Rudd and K. Whelan, “New Tests of The New Keynesian Phillips Curve,” Journal of Monetary Economics, Vol. 52, No. 6, 2005, pp. 1167-1181. doi:10.1016/j.jmoneco.2005.08.006

[15] J. Rudd and K. Whelan, “Modeling Inflation Dynamics: A Critical Review of Recent Research,” Journal of Money, Credit and Banking, Vol. 39, No. 1, 2007, pp. 155-170. doi:10.1111/j.1538-4616.2007.00019.x

[16] J. Stock and M. Watson, “Why Has US Inflation Become Harder To Forecast?” Journal of Money, Credit and Banking, Vol. 39, No. 1, 2007, pp. 3-34. doi:10.1111/j.1538-4616.2007.00014.x

[17] L. S. Ball, “Near-Rationality and Inflation in Two Monetary Regimes,” NBER Working Paper, 2000.

[18] N. G. Mankiw and R. Reis, “Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve,” Harvard University, Cambridge, 2001.

[19] J. C. Fuhrer, “The (un)Importance of Forward-Looking Behavior in Price Specifications,” Journal of Money, Credit and Banking, Vol. 29, No. 3, 1997, pp. 338-350. doi:10.2307/2953698

[20] A. Estrella and J. Fuhrer, “Dynamic Inconsistincies: Counterfactual Implications of a Class of Rational Expectations Models,” The American Economic Review, Vol. 92, No. 4, 2002, pp. 1013-1028. doi:10.1257/00028280260344579

[21] E. Jondeau and H. Le Bihan, “Testing for The New Keynesian Phillips Curve; Additional International Evidence,” Economic Modelling, Vol. 22, No. 3, 2005, pp. 521-550. doi:10.1016/j.econmod.2004.09.002

[22] S. Henzel and T. Wollmershaeuser, “The New Keynesian Phillips Curve and the Role of Expectations: Evidence From the Ifo World Economic Survey,” CESifo Working Paper, 2006.

[23] A. Carriero, “A Simple Test of the New Keynesian Phillips Curve,” Economic Letters, Vol. 100, No. 2, 2008, pp. 241-244. doi:10.1016/j.econlet.2008.02.012

[24] P. Soderlind, U. Soderstrom and A. Vredin, “Can a Calibrated New-Keynesian Model of Monetary Policy Fit the Facts?” SSE/EFI Working Paper Series in Economics and Finance No. 511, 2002.

[25] F. Jean-Baptiste, “Forecasting with the New Keynesian Phillips Curve: Evidence from Survey Data,” Economic Letters, Vol. 117, No. 3, 2012, pp. 811-813. doi:10.1016/j.econlet.2011.02.034

[26] W. Roeger and B. Herz, “Traditional Versus New Keynesian Phillips Curves; Evidence from Output Effects,” International Journal of Central Banking, 2012, pp. 87-109.

[27] G. Chorteas, G. Magonis and T. Panagiotidis, “The Asymmetry of the New Keynesian Phillips Curve in the Euro-Area,” Economic Letters, Vol. 114, No. 2, 2012, pp. 161-163. doi:10.1016/j.econlet.2011.09.035

[28] M. E. Yazgan and H. Yilmazkuday, “Inflation Dynamics of Turkey: A Structural Estimation,” Studies in Nonlinear Dynamics & Econometrics, Vol. 9, No. 1, 2005, pp. 1-13. doi:10.2202/1558-3708.1228

[29] G. Saz, “The Turkish Phillips Curve Experience and the New Keynesian Phillips Curve: A Conceptualization and Application of a Novel Measure for Marginal Costs,” International Research Journal of Finance and Economics, Vol. 63. 2011, pp. 8-45.

[30] J. M. Nason and G. W. Smith, “The New Keynesian Phillips Curve: Lessons from Single-Equation Econometric Estimation,” Economics Quarterly, Vol. 94, No. 4, 2008, pp. 667-684.

[31] R. Koenker and G. Basset, “Regression Quantiles,” Econometrica, Vol. 46, No. 1, 1978, pp. 33-50. doi:10.2307/1913643