Regime Shifts and the Stability of Backward Looking Phillips Curves in Open Economies∗

In this paper we assess the stability of open economy backward looking Phillips curves estimated across two different exchange rate regimes. The time-series we deal with come from the simulation of a New-Keynesian hybrid model suited for performing monetary pol-icy analysis. The statistical assessment we undertake is based on a standard Chow-test. Our results confirm Lindè (2001)’s finding on the low power of the Chow-test in small samples. However, we do not find strong statistical support for the quantitative relevance of the Lu-cas critique when the ’true ’ model of the economy is featured by low degrees of forwardness