Estimated Open Economy New Keynesian Phillips Curves for the G7

Dividing through by N and utilising the equation for the cost-minimising com-
bination of labour and imported intermediate goods yields,

w + pf fwf ^αm ´

P ∖ an J

Appendix II - Data Sources

The following data were obtained from the OECD’s Business Sector Data-
base: real GDP (market prices), y; GDP (market price) deflator, p^d; nominal
compensation of employees, WN; nominal wage per employee, W ; real imports
of goods and services, M^f ; import price deflator, p^f ; and employment, N .The
data run from 1960 quarter 1 to 1999 quarter 4 and are quoted in local cur-
rency units. The world commodity price index, c^p was obtained from the IMF’s
International Financial Statistics database. The data used to calculate the av-
erage value of imported goods used in production as a share of total imports
were obtained from CEPII’s CHELEM (Harmonised Accounts on Trade and
the World Economy) database. The 71 product categories available from 1967
to 1998 have been classified by CEPII into the following sectoral stages of pro-
duction: primary, basic manufacturing, intermediate goods, equipment goods,
mixed products and consumption goods and ‘not elsewhere specified’ products.
To calculate our measure of average value of imported goods used in production
as a share of total imports we include primary, basic manufacturing, intermedi-
ate goods and equipment goods in the numerator. The figures for the G-7 by
country are: USA=0.609, CAN=0.705, GBR=0.634, FRA=0.678, DEU=0.647,
ITA=0.689 and JPN=0.740.

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