Abstract
Inflation dynamics are investigated by estimating a generalized version of the New Keynesian Phillips curve (NKPC) of Galí and Gertler (1999) using Bayesian GMM. US macroeconomic data suggests that the generalized NKPC (GNKPC) performs best in terms of quasi-marginal likelihood among those considered both during and after the Great Inflation period. The estimated GNKPC indicates that when trend inflation fell after the Great Inflation period, the probability of price change decreased and the GNKPC flattened, which is in line with findings by previous studies.
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