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Identification issues in forward-looking models estimated by GMM, with an application to the Phillips curve.

Abstract:

Limited-information methods are commonly used to estimate forwardlooking models with rational expectations, such as the "New Keynesian Phillips Curve" of Galí and Gertler (1999). In this paper, we address issues of identification that have been overlooked due to the incompleteness of the single-equation formulation. We show that problems of weak instruments may arise, depending on the properties of the 'exogenous' variables, and that they are empirically relevant. We also uncover a link betwe...

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Publisher copy:
10.1353/mcb.2005.0031

Authors


Sophocles Mavroeidis More by this author
Journal:
Journal of Money, Credit and Banking
Volume:
37
Issue:
3
Publication date:
2005
DOI:
URN:
uuid:72dcd7ef-f63f-454f-acf3-a27292b16ac1
Local pid:
oai:economics.ouls.ox.ac.uk:15162
Language:
English

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