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