Kiel Working Papers, Kiel Institute for World Economics
No 1686:
Estimating a High-Frequency New-Keynesian Phillips Curve
Steffen Ahrens and Stephen Sacht
Abstract: This paper estimates a high-frequency New Keynesian
Phillips curve via the Generalized Method of Moments. Allowing for
higher-thanusual frequencies strongly mitigates the well-known problems of
smallsample biases and structural breaks. Applying a daily frequency allows
us to obtain eventspecific estimates for the Calvo parameter of nominal
rigidity - for instance for the recent financial and economic crisis -,
which can be easily transformed into their weekly, monthly and quarterly
equivalences to be employed for the analysis of eventspecific monetary and
fiscal policy. With Argentine data from the end of 2007 to the beginning of
2011, we find the daily Calvo parameter to vary in a very close range
around 0.97, which implies averagely fixed prices of approximately 40 days
or equivalently one and a half month or a little less than half a quarter.
This has strong implication for the modeling of monetary policy analysis
since it implies that at a quarterly frequency a flexible price model has
to be employed. In the same vein, to analyze monetary policy in a sticky
price framework, a monthly model seems more appropriate
Keywords: Calvo Staggering, High-Frequency NKM, GMM; (follow links to similar papers)
JEL-Codes: C26,; C63,; E31; (follow links to similar papers)
48 pages, March 2011
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