Kleibergen, F. and Mavroeidis, S. (2009). Weak instrument robust tests in GMM and the new Keynesian Phillips curve Journal of Business and Economic Statistics, 27(3):293--311.
JournalJournal of Business and Economic Statistics
We discuss weak instrument robust statistics in GMM for testing hypotheses on the full parameter vector or on subsets of the parameters. We use these test procedures to reexamine the evidence on the new Keynesian Phillips curve model. We find that U.S. postwar data are consistent with the view that inflation dynamics are predominantly forward-looking, but we cannot rule out the presence of considerable backward-looking dynamics. Moreover, the Phillips curve has become flatter recently, and this is an important factor contributing to its weak identification.