Estimating Phillips Curves in Turbulent Times using the ECB's Survey of Professional Forecasters

Gary Koop, Luca Onorante

Research output: Working paperDiscussion paper

5 Downloads (Pure)

Abstract

This paper uses forecasts from the European Central Bank's Survey of Professional Forecasters to investigate the relationship between inflation and inflation expectations in the euro area. We use theoretical structures based on the New Keynesian and Neoclassical Phillips curves to inform our empirical work. Given the relatively short data span of the Survey of Professional Forecasters and the need to control for many explanatory variables, we use dynamic model averaging in order to ensure a parsimonious econometric specification. We use both regression-based and VAR-based methods. We find no support for the backward looking behavior embedded in the Neoclassical Phillips curve. Much more support is found for the forward looking behavior of the New Keynesian Phillips curve, but most of this support is found after the beginning of the financial crisis.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-34
Number of pages35
Volume11
Publication statusPublished - Feb 2011

Keywords

  • inflation expectations
  • survey of professional forecasters
  • Phillips curve
  • Bayesian

Projects

Cite this

Koop, G., & Onorante, L. (2011). Estimating Phillips Curves in Turbulent Times using the ECB's Survey of Professional Forecasters. (09 ed.) (pp. 1-34). University of Strathclyde.