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

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Abstract

This paper primarily examines whether the ‘hybrid new Keynesian Phillips curve’ (HNKPC) holds for four important emerging economics viz., Brazil, Russia, India and South Africa. This has been done after testing for the structural stability of this relationship. Econometric issues like the test of unit roots in presence of a structural break and estimation of output gap have also been done appropriately. Our findings suggest that the HNKPC is not stable for all the four countries. However, the analysis based on the two sub-periods thus formed clearly shows mixed evidence in respect of holding of this relationship.

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Notes

  1. The data on WPI has been obtained from the official website of Reserve Bank of India (www.rbi.org.in).

  2. See, the press release (http://www.thehindu.com/business/Economy/rbi-adopts-new-cpi-as-key-measure-of-inflation/article5859713.ece).

  3. Perron and Yabu (2009) have considered a quasi-feasible generalized least squares technique that uses a super-efficient estimate of the sum of autoregressive parameters, which governs the stationary or integrated behaviour of a time series.

  4. A GAUSS program code for Perron and Yabu (2009) structural break test and a MATLAB code for Kim and Perron (2009) unit root test in presence of a structural break have been taken from the official website of Pierre Perron.

  5. Kim and Perron (2009) have considered three types of additive outlier models viz., A1, A2 and A3, representing the occurrence of a structural break only in the intercept, only in the slope, and both in the intercept and slope coefficients of a time series, respectively.

  6. See, for details, Pinheiro et al. (2000), Fasolo and Portugal (2004), and Evangelist and Sathe (2006).

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Acknowledgments

The authors are thankful to an anonymous referee for very insightful comments. The errors, if any, lie solely with the authors.

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  1. Kushal Banik Chowdhury

    Present address: Indian Statistical Institute, North-East Centre, Tezpur, 784028, Assam, India

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  1. Economic Research Unit, Indian Statistical Institute, 203 B.T. Road, Kolkata, 700108, India

    Kushal Banik Chowdhury & Nityananda Sarkar

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Chowdhury, K.B., Sarkar, N. Is the Hybrid New Keynesian Phillips Curve Stable? Evidence from Some Emerging Economies. J. Quant. Econ. 15, 427–449 (2017). https://doi.org/10.1007/s40953-016-0059-y

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