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The New Keynesian Phillips Curve For The Euro Area: Which Specification?

par Carré, Emmanuel
Référence Brussels economic review, 53, 3/4, page (337-356)
Publication Publié, 2010

Article révisé par les pairs

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Résumé :

The New Keynesian Phillips Curve (NKPC) specification in the Euro area is controversial. For some it is purely forward-looking, when others incorporate a backward-looking component into a ‘hybrid’ NKPC (HNKPC). This article contributes to this debate first by drawing stylised facts of the Euro area (H)NKPC from a quantitative review of 88 comparable empirical estimates from 21 articles. If the forward-looking share dominates, a substantial backward-looking fraction is found (about one-third). This result is fairly robust to sub-sample and simple tests. It is also shown that micro evidence from firms’ pricing surveys is favourable to this result. Since the observed variations in estimates could be a limitation to this otherwise clear result, the second contribution of this article is to explore the factors driving these variations. Finally, policy implications are examined.