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Estimating Unobservable Inflation Expectations in the New Keynesian Phillips Curve

Francesca Rondina ()

Econometrics, 2018, vol. 6, issue 1, 1-20

Abstract: This paper uses an econometric model and Bayesian estimation to reverse engineer the path of inflation expectations implied by the New Keynesian Phillips Curve and the data. The estimated expectations roughly track the patterns of a number of common measures of expected inflation available from surveys or computed from financial data. In particular, they exhibit the strongest correlation with the inflation forecasts of the respondents in the University of Michigan Survey of Consumers. The estimated model also shows evidence of the anchoring of long run inflation expectations to a value that is in the range of the target inflation rate.

Keywords: Phillips curve; expectations; survey data; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2018
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