Traditional versus New Keynesian Phillips Curves : Evidence from Output Effects

Titelangaben

Roeger, Werner ; Herz, Bernhard:
Traditional versus New Keynesian Phillips Curves : Evidence from Output Effects.
In: International Journal of Central Banking. Bd. 8 (2012) Heft 2 . - S. 87-109.
ISSN 1815-7556

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Abstract

We identify a crucial difference between the backward-looking and forward-looking Phillips curve concerning thereal output effects of monetary policy shocks. The backward-looking Phillips curve predicts a strict intertemporal trade-off in the case of monetary shocks: a positive short-run response of output is followed by a period in which output is below baseline and the cumulative output effect is exactly zero. In contrast, the forward-looking model implies a positive cumu-lative output effect. The empirical evidence on the cumulated output effects of money is consistent with the forward-looking model. We also use this method to determine the degree of forward-looking price setting.