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Observed Inflation Forecasts and the New Keynesian Phillips Curve*

Chengsi Zhang (), Denise Osborn () and Dong Heon Kim ()

Oxford Bulletin of Economics and Statistics, 2009, vol. 71, issue 3, 375-398

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.

Date: 2009
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https://doi.org/10.1111/j.1468-0084.2009.00544.x

Related works:
Working Paper: Observed Inflation Forecasts and the New Keynesian Phillips Curve (2008) Downloads
Working Paper: Observed Inflation Forecasts and the New Keynesian Phillips Curve (2006) Downloads
Working Paper: Observed Inflation Forecasts and the New Keynesian Phillips Curve (2006) Downloads
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