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Misspecification Testing: Non-Invariance of Expectations Models of Inflation

Abstract:

Many economic models (such as the new-Keynesian Phillips curve, NKPC) include expected future values, often estimated after replacing the expected value by the actual future outcome, using Instrumental Variables (IV) or Generalized Method of Moments (GMM). Although crises, breaks, and regime shifts are relatively common, the underlying theory does not allow for their occurrence. We show the consequences for such models of breaks in data processes, and propose an impulse-indicator saturation t...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1080/07474938.2013.825137

Authors


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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Role:
Author
More by this author
Institution:
University of Oxford
Division:
SSD
Department:
Economics
Sub department:
EMOD
Role:
Author
Publisher:
Taylor and Francis Publisher's website
Journal:
Econometric Reviews Journal website
Volume:
33
Issue:
5-6
Pages:
553-574
Publication date:
2014-08-18
DOI:
EISSN:
1532-4168
ISSN:
0747-4938
Source identifiers:
443027
Keywords:
Pubs id:
pubs:443027
UUID:
uuid:8086b51b-14b5-43f9-96b0-3894cacc8867
Local pid:
pubs:443027
Deposit date:
2016-12-16

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