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Economies 2017, 5(3), 24; doi:10.3390/economies5030024

The Nonlinearity of the New Keynesian Phillips Curve: The Case of Tunisia

Department of Economics, Faculty of economics and Management, University of Sfax, 3026 Sfax, Tunisia
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Academic Editor: Tapas Mishra
Received: 27 December 2016 / Revised: 30 May 2017 / Accepted: 20 June 2017 / Published: 7 July 2017
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Abstract

This article seeks to check the nonlinearity of the Phillips curve in Tunisia for the 1993–2012 period, relying on a hybrid new Keynesian Phillips curve modeled via a Logistic Smooth Transition Regression (LSTR) model with endogenous variables. We estimate this model using the nonlinear instrumental variables. The empirical results corroborate the new Keynesian assumption ofprice rigidity and show that the response of inflation to the output gap tends to be significant only if the inflation rate tends to be relatively high and exceeds a certain threshold. For a low inflation rate, the price rigidity dominates. This result is particularly evident in Tunisia, especially for the years following the 2011 revolution during which the elasticity of inflation rate to an excess demand has become highly important and the inflation rate experienced record levels. View Full-Text
Keywords: new Keynesian Phillips curve; nonlinearity; menu cost model; price rigidity; Tunisia new Keynesian Phillips curve; nonlinearity; menu cost model; price rigidity; Tunisia
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Kobbi, I.; Gabsi, F.-B. The Nonlinearity of the New Keynesian Phillips Curve: The Case of Tunisia. Economies 2017, 5, 24.

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