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 journalJournal articlepeer-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 languageEnglish
    Pages (from-to)42-55
    Number of pages14
    JournalPacific Economic Review
    Volume27
    Issue number1
    Early online date24 Jan 2021
    DOIs
    Publication statusPublished - Feb 2022

    Scopus Subject Areas

    • Economics and Econometrics

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