Is the Hybrid New Keynesian Phillips Curve Stable? Evidence from Some Emerging Economies

Chowdhury, Kushal Banik; Sarkar, Nityananda

doi:10.1007/s40953-016-0059-y

Cited by 11 publications

(6 citation statements)

References 56 publications

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“…Our findings broadly align with the findings from the earlier studies such as Dua and Gaur (2010), Patra and Kapur (2012), Sahu (2013) and Chowdhury and Sarkar (2017). These studies emphasized the importance of both the backward-looking and forward-looking inflation expectations in determining inflation in India.…”

Section: Empirical Estimation and Resultssupporting

confidence: 92%

“…Also, they found that the hybrid NKPC is significantly backward looking and relatively flat in India. Similarly, Chowdhury and Sarkar (2017) estimated the hybrid NKPC for four emerging economies including India. They found that after accounting for a structural break both the forward-looking and backward-looking components are significant in explaining inflation in all countries.…”

Section: Review Of the Literaturementioning

confidence: 99%

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Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective

Salunkhe

Patnaik

2019

South Asian Journal of Macroeconomics and Public Finance

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The present study estimates various specifications of the New Keynesian Phillips Curve (NKPC) models for India over 1996Q2 to 2017Q2 using Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation, separately. The empirical results suggest that the data support all the specifications of the Phillips curve models based on both the CPI and WPI inflations. However, the backward looking and hybrid models provide robust results for both the inflation indices. While the forward-looking behaviour dominates the CPI inflation trajectory, the backward-looking behaviour greatly influences the trajectory of WPI inflation. Also, a small-to-moderate degree of persistence is evident in both the CPI and WPI inflation. The output gap, which mainly represents the demand side pressures, turns up the major force determining both the CPI and WPI inflations. Besides the output gap, real effective exchange rate (reer), international crude oil price inflation, global non-fuel commodity price inflation and rainfall have a modest impact on the CPI and WPI inflations. JEL Classification: E12, E52, C36, C14

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Section: Empirical Estimation and Resultssupporting

confidence: 92%

Section: Review Of the Literaturementioning

confidence: 99%

Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective

Salunkhe

Patnaik

2019

South Asian Journal of Macroeconomics and Public Finance

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“…For India, the coefficient of output gap turns out to be negative, while for China, a positive output gap has been observed. Our results conform to a more recent study by Chowdhury and Sarkar (2017), who while estimating hybrid NKPC for India (and Brazil, China and Russia) found the output gap coefficient to be negative and significant for one of the sub-sample. Thus, the existence of the Phillips curve for India is quite a possibility as per Model I, but the robustness of the relationship is certainly less straightforward.…”

Section: Inflation and Fiscal Deficitsupporting

confidence: 91%

Nexus between inflation and fiscal deficit: a comparative study of India and China

Kaur

2022

JCEFTS

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Purpose The purpose of this paper is to examine the deficit–inflation nexus in the two fastest growing economies, India and China, which happen to be crucial affiliates of the global growth generator countries apart from their association in Brazil, Russia, India, China, and South Africa. Design/methodology/approach The paper uses the prism of the vector auto regression framework, for the period 1985–1986 to 2016–2017 for both India and China. For this purpose, gross fiscal deficit, money supply, exchange rate, crude oil prices and output gap are examined as the key elements in the determination of inflation. The econometric framework used chiefly comprises of cointegration analysis, vector error correction model, Granger causality and impulse response functions. Findings The findings of this paper support the hypothesis that fiscal deficits are inflationary only in the Indian context and that the Ricardian equivalence cannot be negated for China at least in the short run. The results presented in the paper are a little agnostic about whether New Keynesian Phillips Curve (NKPC) explains the inflation dynamics in India, given that both inflation inertia and output gap are not robust. However, for the Chinese economy, NKPC along with structural theory is instrumental in describing trends pertaining to inflation during the period of the study. Practical Implications The paper warrants broader policy framework to aim at addressing structural bottlenecks to ensure non-inflationary growth keeping in mind the structural views on inflation. Furthermore, the paper fosters greater synthesis between monetary and fiscal policies, especially considering the global economic disruptions the world economy is subject to. Originality/value Considering there are only a limited number of studies on fiscal deficit of China, the present paper is of paramount significance in terms of growing concern over the sustainability of the growth process in China. Additionally, the paper is first-of-its-kind attempt to account the effectiveness of a healthy monetary–fiscal interface in achieving macroeconomic stability in India and China.

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“…They find that inflation is more sensitive to its retrospective component, indicating greater inflationary persistence and the importance of high inflation history in the country. Chowdhury and Sarkar (2017) use the output gap to estimate the BRIC economies PC (1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011). They find structural change and divide the estimates into two subperiods.…”

Section: Literature Reviewmentioning

confidence: 99%

Pricing Process in Mexico: New Evidence on the Inflation Dynamics

Loría¹,

Bonecchi²,

Juárez³

2022

ecos.econ.

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We analyze the inflation dynamics in Mexico during inflation targeting period by a GMM estimate of the Hybrid New Keynesian Phillips Curve in its open and closed economy versions. We update and discuss previous results and expand the capacity of this tool to analyze inflationary dynamics by incorporating the exchange rate on labor costs. We find: a) robust evidence of adaptive and rational expectations; b) incorporating the exchange rate improves the inflation fit; c) this version of the Phillips Curve has strengthened since Great Recession, and e) expectations formation process changes during inflationary episodes according to the origin of shocks.

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Is the Hybrid New Keynesian Phillips Curve Stable? Evidence from Some Emerging Economies

Cited by 11 publications

References 56 publications

Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective

Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective

Nexus between inflation and fiscal deficit: a comparative study of India and China

Pricing Process in Mexico: New Evidence on the Inflation Dynamics

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