The Sticky Information Phillips Curve: Evidence for Australia

The Sticky Information Phillips curve ( SIPC ) provides a theoretically appealing alternative to the sticky price New‐Keynesian Phillips curve ( NKPC ). This paper assesses the empirical performance of the SIPC for Australia. Estimates of the model's structural parameters indicate rejection of the SIPC over the low‐inflation period, but the SIPC fits the data better over a longer sample period including the disinflation of the early 1990s. Overall, though, the NKPC appears to fit the data better than the SIPC . This is partly because forward‐looking inflation dynamics are more important than implied by the SIPC under plausible parameter values.