Regime shifts and the stability of backward-looking Phillips curves in open economies

We assess the stability of open-economy backward-looking Phillips curves estimated over two different exchange rate regimes. We calibrate a new-Keynesian monetary policy model and employ it for producing artificial data. A monetary policy break replicating the move from a Target-Zone regime to a Free-Floating regime implemented in Sweden in 1992 is modeled. We employ two different, plausibly calibrated Taylor rules to describe the Swedish monetary policy conduct, and fit a reduced-form Phillips curve to the artificial data. While not rejecting the statistical relevance of the Lucas critique, we find that its economic importance does not seem to be overwhelming.