Banca de DEFESA: IGOR MANOEL BEZERRA ROQUE MENDES

Uma banca de DEFESA de MESTRADO foi cadastrada pelo programa.
STUDENT : IGOR MANOEL BEZERRA ROQUE MENDES
DATE: 23/02/2024
TIME: 16:00
LOCAL: Sessão virtual
TITLE:

Can monetary shocks identify the Phillips curve extensions?

KEY WORDS:

monetary shocks; Phillips curve extensions

PAGES: 65
BIG AREA: Ciências Sociais Aplicadas
AREA: Economia
SUMMARY:

Recently, Barnichon & Mesters (2020) (henceforth referred to as BM) introduced a
new approach to identify modern macro equations, employing structural shocks as instruments
rather than lagged macro variables. For the new Keynesian Phillips curve (NKPC), a suggestion
was put forth to use monetary shocks, such as Romer & Romer (2004) and Kuttner (2001).
According to the authors, monetary shocks are exogenous, representing innovations in the
systematic conduct of monetary policy (GALÍ, 2015; MCLEAY; TENREYRO, 2020), and are
relevant due to the assumption of an existing IS curve in the economy. As a result, using an
identification-robust procedure, they are able to identify the pure hybrid NKPC with narrow
confidence intervals, consistently lying within the space predicted by theory, in contrast to the
broad confidence intervals found in much of the literature (MAVROEIDIS; PLAGBORG-MØLLER;
STOCK, 2014). However, some relevant issues are discussed in the literature of the NKPC regarding
the modeling chosen by BM. For instance, the Phillips curve they estimated arises from the
logarithmic linearization of firms’ optimization conditions around a steady state of zero infla-
tion1, but we can allow for a non-zero steady-state inflation, which is equivalent to considering
trend inflation.2 As explained by Ascari & Sbordone (2014), the conduct of monetary policy
should be analyzed by accounting for the positive inflation trend, as it adequately explains
inflation persistence. Hence, the NKPC equation includes additional forward-looking terms on
the right-hand side, and the semi-structural parameters are functions of the inflation trend.
Thus, if inflation has a different non-zero steady state, the NKPC cannot be estimated as in
BM.This paper presents two significant contributions to the literature. The first contribution
involves a comprehensive exploration of the effectiveness of monetary shocks in identifying the
Phillips curve. In doing so, we join with the literature on the identification of macroeconomic
shocks and their impulse responses, such as Ramey (2016), Stock & Watson (2016), and BM.
Secondly, this study includes analyses of NKPC specifications that are often overlooked in the
weak identification literature. In general, the studies make use of a pure hybrid NKPC or some
variation of the NKPC, such as the models by Blanchard & Galí (2007) and Blanchard & Galí
(2010).7 We join Aragón & Galvão (2023), who analyze the cost channel, and Mavroeidis,
Plagborg-Møller & Stock (2014), who examine both cost channel and trend inflation.8

 

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