EconPapers    
Economics at your fingertips  
 

Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market

Hardik Marfatia

The B.E. Journal of Macroeconomics, 2018, vol. 18, issue 1, 18

Abstract: This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates – the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.

Keywords: inflation indexed bonds; New Keynesian Phillips Curve; output gap; unobserved component model (search for similar items in EconPapers)
JEL-codes: E31 E32 C32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.degruyter.com/view/j/bejm.2018.18.issu ... -0005.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:18:y:2018:i:1:p:18:n:5

Ordering information: This journal article can be ordered from
https://www.degruyter.com/view/j/bejm

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2019-09-16
Handle: RePEc:bpj:bejmac:v:18:y:2018:i:1:p:18:n:5