Tracing the Causes of Inflation in Canada Choose to estimate a New Keynesian Phillips Curve, which will be the relationship between inflation, expected inflation and the output gap.

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Topic: Tracing the Causes of Inflation in Canada Choose to estimate a New Keynesian Phillips Curve, which will be the relationship between inflation, expected inflation and the output gap. Most people now use the output gap instead of unemployment when estimating Phillips Curves.Then estimate a NKPC .You can get the output gap by taking the Hodrick Prescott filter cycle of the log of real GDP. Teacher wants these two formulas: 1 pet = gamma 1 Δ ln (mt – 1) + gamma 2 Δ ln (mt – 2) + beta 1 (/ lnGDPt lnDt – 1-1) + beta 2 (/ lnGDPt lnDt – 2-2) + et D = (fiducial deficits = Tax – Government Expenditure) Is pet = pt-1?