How New Keynesian is the US Phillips Curve?

33 Pages Posted: 23 Jan 2014

Date Written: November 28, 2013


I provide a generalization of Calvo price setting, to include non-overlapping contracts as a special case and embed this in a small DSGE model. The resulting Generalized Phillips Curve (GPC) nests New-Keynesian and Neoclassical versions. I linearize the model around a potentially non-zero trend inflation rate, and estimate it on US data using Bayesian methods, allowing for Markov switching in the variances of structural shocks. I find that the Phillips curve is 100% New Keynesian. There is no evidence of either forward or backward indexation. I illustrate that trend inflation affects the estimation of the Phillips curve.

Keywords: Phillips curve, neoclassical, indexation, trend inflation, regime switch

JEL Classification: E13, E31

Suggested Citation

Alstadheim, Ragna, How New Keynesian is the US Phillips Curve? (November 28, 2013). Norges Bank Working Paper 2013/25, Available at SSRN: or

Ragna Alstadheim (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107

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