Estimating trend inflation in a regime-switching Phillips curve

Jouchi Nakajima

No 750, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This study develops a regime-switching Phillips curve model to estimate trend inflation. Extending the earlier work, we allow trend inflation, the slope of the Phillips curve, and the oil price pass-through rate to follow a regime-switching process. An empirical analysis using Japan’s consumer price index illustrates that including the oil price and its time-varying passthrough rate improves the model’s ability to forecast inflation. The empirical results also show that the obtained trend inflation highly correlates with firms’ inflation expectations.

Keywords: Inflation expectations; Oil prices; Phillips curve; Regime-switching model; Trend inflation (search for similar items in EconPapers)
JEL-codes: C22 E31 E42 E52 E58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2023-12
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:750

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