The Hybrid New Keynesian Phillips Curve with Multiple Lags of Inflation

摘要

In deriving the hybrid new Keynesian Phillips curve(HNKPC) in Galí and Gertler (1999) and Holmberg (2006), it is assumed that backward-looking firms index their prices to theaverage prices newly set last period plus last period’s inflation rate,resulting in a Phillips curve equation that relates current inflation to ademand variable, expected future inflation, and last period’s inflation. Thepresent study generalizes the derivation of the HNKPC to allow firms to indexprices to multiple lags of inflation, resulting in a HNKPC in which current inflationdepends on multiple lags of inflation instead of only one lag of inflation,providing theoretical justification for empirical specifications of the HNKPCthat include more than one lag of inflation.