A Hybrid New Keynesian Phillips Curve in framework a Dynamic Stochastic General Equilibrium Model

The identification and explanation of the relationship between inflation and unemployment in the country’s economy has a special place in the process of economic and political decision - making. Assessing the relation between inflation and unemployment can help policymakers and economists to assess economic performance. Phillips curve is one of the most famous relationships in the macro economy which explores the relation between inflation and unemployment. The New Keynesian Phillips Curve was formed in the 1990s based on nominal rigidity and rational expectations, and has been widely used in dynamic inflation models and in the study of monetary policy. This study estimated a Hybrid New Keynesian Phillips Curve in Iran between years 1995:1-2017:4 using a dynamic stochastic general equilibrium model and exploring the effects of technology, cost push, government expenditures, oil, and monetary shocks on inflation. The results of this study showed that the proposed model simulates the periodic behavior and variations of the variables as well. Also, government expenditure, cost push shocks increased inflation and technology, oil, and monetary shocks decreased inflation.