Muto, Ichiro (2007): Estimating a New Keynesian Phillips Curve with a Corrected Measure of Real Marginal Cost: Evidence in Japan.
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We estimate a New Keynesian Phillips curve (NKPC) in Japan, focusing on the measurement of real marginal cost (RMC). Especially, we correct labor share by taking account of two kinds of labor market frictions: (i) labor adjustment costs and (ii) real wage rigidity. Our results show that the consideration of these labor market frictions greatly improves the fit of Japan's NKPC. Furthermore, if we additionally incorporate materials prices in the calculation of RMC, then the fit of the NKPC is further improved. Our most important finding is that the conventional backward-looking component is no more needed to explain Japan's inflation dynamics if we use a corrected measure of RMC.
|Item Type:||MPRA Paper|
|Original Title:||Estimating a New Keynesian Phillips Curve with a Corrected Measure of Real Marginal Cost: Evidence in Japan|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation|
|Depositing User:||Ichiro Muto|
|Date Deposited:||31. Aug 2007|
|Last Modified:||13. Feb 2013 10:14|