The New Keynesian Phillips Curve : estimating the new Keynesian Phillips curve using survey expectations

Abstract

The purpose of this thesis has been to estimate the New Keynesian Phillips curve relation using Norwegian data, and more precisely using survey expectations as instruments for the expected inflation term in the NPC to see how this would influence the results. As a comparison to the survey estimates I have estimated a replication of the Galí and Gertler (1999) study. The estimations using both survey expectations and the Galí and Gertler instruments turned out to be significant, and with the size and sign of the coefficients as expected. Based on my estimation the Galí and Gertler instruments provide a better fit model of the NPC than using survey expectations, however both methods are valid to estimate the NPC.