The Low Predictive Power of Simple Phillips Curves in Chile: A Real-Time Evaluation
In this article we explore the existence, robustness and size of the contribution that several activity measures make when predicting inflation in Chile. For that purpose, we use backward-looking Phillips curves and make use of a real-time database to get an evaluation of predictive ability consistent with the uncertainty faced by policy-makers when making decisions in real time. Our main results confirm those shown by the recent literature in the USA: the predictive contribution of the GDP measures considered here is episodic, unstable and of moderate size. These results are robust to the estimation being made with either revised or real-time data. This holds true in a context in which final and first vintage GDP measures are shown to differ significantly and to generate quite different inflation forecasts.
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