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- Title
Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries.
- Authors
Rumler, Fabio
- Abstract
This paper extends the existing literature on the open economy New Keynesian Phillips Curve by incorporating three different factors of production, domestic labor and imported as well as domestically produced intermediate goods, into a general model which nests existing closed economy and open economy models. The model is estimated for nine euro area countries and the euro area aggregate. We find that the general specification of our model improves the fit of the New Keynesian Phillips Curve considerably compared to the closed economy specification. The estimates of the structural parameters of the model suggest strong heterogeneity in the degree of price rigidity across euro area counties. Furthermore, we find the degree of price rigidity to be systematically lower in the open economy specification than in the closed economy specification and also lower than in the general specification of our model.
- Subjects
EUROPEAN Union countries; PHILLIPS curve; ECONOMIC forecasting; DEMAND function; MONEY; MATHEMATICAL models of income distribution; MATHEMATICAL models of the effect of inflation of unemployment; MATHEMATICAL models of inflation; RATIONAL expectations (Economic theory); INDUSTRIAL goods; FACTORS of production; PRODUCTION (Economic theory)
- Publication
Open Economies Review, 2007, Vol 18, Issue 4, p427
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-007-9028-6