Working Paper no. 31, “The New Keynesian Phillips Curve: In Search of Improvements and Adaptation to the Open Economy”, by Thorvardur Tjörvi Ólafsson has been published on this website. The paper provides a survey on the recent literature on the new Keynesian Phillips curve: the controversies surrounding its microfoundation and estimation, the approaches that have been tried to improve its empirical fit and the challenges it faces adapting to the open-economy framework. The new Keynesian Phillips curve plays an important role in models used for explaining and forecasting inflation in many of the main central banks in the world. The adaptation to the open economy has been particularly challenging but it is nevertheless a crucial feature for any model to be used for inflation forecasting, especially in a small open economy like Iceland.

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