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Asymmetries in New Keynesian Phillips Curves: Evidence from US Cities

Sonora, Robert (2010): Asymmetries in New Keynesian Phillips Curves: Evidence from US Cities.

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Abstract

Studies of the relationship between national in ation rates and the output gap, as formalized in the New Keynesian Phillips Curve, ignore macroeconomic heterogeneity which exist in dierent parts of the country. This paper investigates dierences in in ation and output across United States cities. The policy implications are dicult to ignore given dierences in production across the country as a whole. Also of interest is identifying the median city-economy in the US. Thus when policy is implemented which city sees the greatest benet of new policy? In addition to considering the standard Phillips relation between inflation and the output gap, I also consider the relationship between inflation and an index of wage costs as suggested in the literature. Preliminary results demonstrate a signicant degree of heterogeneity across cities implying centralized policy prescriptions are helpful for some economies are harmful to others.

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