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2015•RePEc: Research Papers in EconomicsRequires access

Comments on "Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve"

Fabià Gumbau-Brisa, Denny Lie

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Abstract

This comment reexamines the finding in Cogley and Sbordone (Trend Inflation, Indexation,and Inflation Persistence in the New Keynesian Phillips Curve, American Economic Review98(5): 2101-26, 2008) that the New Keynesian Phillips curve is purely forward-looking once time-varying trend inflation is accounted for. We perform various types of robustness analysis involving the second-stage estimation procedure, the number of indexation lags, and the vantage point of expectations. All in all, our estimates show that the main result in Cogley and Sbordone is not robust to these seemingly innocuous modifications.

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What this paper is about

This comment reexamines the finding in Cogley and Sbordone (Trend Inflation, Indexation,and Inflation Persistence in the New Keynesian Phillips Curve, American Economic Review98(5): 2101-26, 2008) that the New Keynesian Phillips curve is purely forward-looking once time-varying trend inflation is accounted for. We perform various types of robustness analysis involving the second-stage estimation procedure, the number of indexation lags, and the vantage point of expectations. All in all, our estimates show that the main result in Cogley and Sbordone is not robust to these seemingly innocuous modifications.

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Available abstract

This comment reexamines the finding in Cogley and Sbordone (Trend Inflation, Indexation,and Inflation Persistence in the New Keynesian Phillips Curve, American Economic Review98(5): 2101-26, 2008) that the New Keynesian Phillips curve is purely forward-looking once time-varying trend inflation is accounted for. We perform various types of robustness analysis involving the second-stage estimation procedure, the number of indexation lags, and the vantage point of expectations. All in all, our estimates show that the main result in Cogley and Sbordone is not robust to these seemingly innocuous modifications.

Key concepts: Indexation, Phillips curve, Economics, New Keynesian economics, Keynesian economics, Inflation (cosmology), Robustness (evolution), Econometrics

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