Hong Kong's New Keynesian Phillips Curve: Sticky information or sticky price?

Tsz Hin Hung; Yum K. Kwan

doi:10.1111/1468-0106.12354

Hong Kong's New Keynesian Phillips Curve: Sticky information or sticky price?

Tsz Hin Hung^*, Yum K. Kwan^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This paper studies the validity of Hong Kongʼs New Keynesian Phillips Curve, focusing on the sticky price and the sticky information model. Drawing on Hong Kongʼs quarterly data 1982Q1–2017Q2, we find that (a) both models can account for the cyclical movements of the observed inflation dynamics, but the sticky information model appears to be better in predictive performance; (b) the Hong Kong economy is characterized by substantial price rigidity but very low information rigidity; and (c) the sticky-information model highlights the importance of past expectations in explaining the inflation dynamics in Hong Kong.

Original language	English
Pages (from-to)	42-55
Number of pages	14
Journal	Pacific Economic Review
Volume	27
Issue number	1
Early online date	24 Jan 2021
DOIs	https://doi.org/10.1111/1468-0106.12354
Publication status	Published - Feb 2022

Scopus Subject Areas

Economics and Econometrics

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title = "Hong Kong's New Keynesian Phillips Curve: Sticky information or sticky price?",

abstract = "This paper studies the validity of Hong Kongʼs New Keynesian Phillips Curve, focusing on the sticky price and the sticky information model. Drawing on Hong Kongʼs quarterly data 1982Q1–2017Q2, we find that (a) both models can account for the cyclical movements of the observed inflation dynamics, but the sticky information model appears to be better in predictive performance; (b) the Hong Kong economy is characterized by substantial price rigidity but very low information rigidity; and (c) the sticky-information model highlights the importance of past expectations in explaining the inflation dynamics in Hong Kong.",

author = "Hung, {Tsz Hin} and Kwan, {Yum K.}",

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Hong Kong's New Keynesian Phillips Curve: Sticky information or sticky price?

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