Short-Run Dynamics of Inflation: Estimating a Hybrid New-Keynesian Phillips Curve for Argentina (1993-2007)

Abstract

In the present paper we estimate a hybrid New Keynesian Phillips curve for Argentina during the period 1993-2007. We extend the empirical model to the case of an open economy, separately considering the influence of nominal devaluation and external inflation on domestic prices. For the full sample, we find that inflation responds to both past behavior and expectations about the future. However, the relative importance of past inflation is greater. We evaluate the stability of the parameters and find that it is rejected when we consider the change of regime in 2002. In line with recent literature on the dynamics of inflation, when trend inflation increases, the influence of the inflation gap product on domestic prices weakens and inflation responds more strongly to expectations about the future.

Clasificación JEL: C5 ; E31