Structural change has been conjectured to lead to an upward bias in the estimated forward expectations coefficient in New-Keynesian Phillips curves. We present a simple New-Keynesian model that enables us to assess this proposition. In particular, we investigate the issue of upward bias in the estimated coefficients of the expectations variable in the New-Keynesian Phillips curve based on a mod...

This article seeks to check the nonlinearity of the Phillips curve in Tunisia for the 1993–2012 period, relying on a hybrid new Keynesian Phillips curve modeled via a Logistic Smooth Transition Regression (LSTR) model with endogenous variables. We estimate this model using the nonlinear instrumental variables. The empirical results corroborate the new Keynesian assumption ofprice rigidity and s...

We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory com...

www.philadelphiafed.org to the financial instruments that help guard savings from being eroded by inflation.1 Also, households and firms often write contracts that are stated in dollar amounts (nominal terms). A worker may, for example, sign a contract to work over the upcoming year for a fixed dollar amount. If inflation turns out to be higher than what was expected at the time the contract wa...

* I would like to thank Lutz Weinke for calling my attention to a mistake in my previous analysis of this model, Larry Christiano for helpful discussions, and Mauro Roca for research assistance.