Abstract
This study tests the hybrid New Keynesian Phillips curve using a novel panel dataset of the 50 US states from 1977 to 2018. The results suggest that the hybrid New Keynesian Phillips curve is a robust representation of the evolution of US inflation, and emphasise the role of unit labour cost as a driving variable. Consistent with , we find relatively larger weights for future inflation than for lagged inflation. This finding confirms the theory of forward-looking behaviour. Furthermore, we obtain more evidence of dominant forward-looking behaviour by using principal component-based instruments, finding that using principal components is a good option to overcome weak identifications.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
