IDEAS home Printed from https://ideas.repec.org/p/sef/csefwp/78.html
   My bibliography  Save this paper

Inflation Dynamics and Subjective Expectations in the United States

Author

Abstract

We estimate a forward looking New Keynesian Phillips Curve (NKPC) for the U.S. using data from the Survey of Professional Forecasters as proxy for expected inflation. We find that the NKPC captures inflation dynamics well, independent from whether output or unit labor costs are used as a measure of marginal costs. We show that identification of expectations exploiting orthogonality to output is severely distorted and explains why the NKPC estimated with survey data performs much better than under rational expectations. We also find that lagged inflation enters the price equation significantly suggesting that there is a role for lagged inflation beyond that of capturing non-rationalities in expectations. Estimating the NKPC of Christiano et al. (2001) where lagged inflation enters due to price indexation by non-reoptimizing firms, we find that it captures the role of lagged inflation reasonably well.

Suggested Citation

  • Klaus Adam & Mario Padula, 2002. "Inflation Dynamics and Subjective Expectations in the United States," CSEF Working Papers 78, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 02 Jun 2009.
  • Handle: RePEc:sef:csefwp:78
    as

    Download full text from publisher

    File URL: http://www.csef.it/WP/wp78.pdf
    Download Restriction: no

    Other versions of this item:

    More about this item

    Keywords

    Inflation; Phillips curve; Subjective Expectations;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:78. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio). General contact details of provider: http://edirc.repec.org/data/cssalit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.