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Observed Inflation Forecasts and the New Keynesian Phillips Curve

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Author Info
Chengsi Zhang
Denise R. Osborn
Dong Heon Kim

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Abstract

This paper investigates the empirical success of the New Keynesian Phillips Curve (NKPC) in explaining US inflation when observed measures of inflation expectations are used in conjunction with the output gap. The paper contributes to the literature by addressing the important problem of serial correlation in the stylized NKPC and developing an extended model to account for this serial correlation. Contrary to recent results indicating no role for the output gap, we find it to be a statistically significant driving variable for inflation, with this finding robust to whether the inflation expectations series used relates to individual consumers, professional forecasters or the US Fed. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0084.2009.00544.x
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Publisher Info
Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 71 (2009)
Issue (Month): 3 (06)
Pages: 375-398
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Handle: RePEc:bla:obuest:v:71:y:2009:i:3:p:375-398

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michal Franta & Branislav Saxa & Katerina Smidkova, 2007. "Inflation Persistence in New EU Member States: Is It Different Than in the Euro Area Members?," Working Papers 2007/10, Czech National Bank, Research Department. [Downloadable!]
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