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Phillips curves in the euro area

Laura Moretti (), Luca Onorante () and Shayan Zakipour-Saber
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Shayan Zakipour-Saber: Central Bank of Ireland

No 8/RT/19, Research Technical Papers from Central Bank of Ireland

Abstract: We perform a robust estimation of the Phillips curve in the euro area using a battery of 630 theory-driven models.We extend the existing literature by adding model specifications, taking into account the uncertainty in the measurement of variables and testing for potential non-linearities and structural changes. Using Dynamic Model Averaging, weidentify the most important determinants of inflation over the sample. We then forecast core inflation 12 quarters ahead and present its probability distribution. We compare the distribution of forecasts performed in recent years, and we assess, in a probabilistic manner, the convergence towards a sustainable path of inflation.

Keywords: Phillips curves; Dynamic Model Averaging; nonlinearities; structural changes; density forecast. (search for similar items in EconPapers)
JEL-codes: C30 E52 F41 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2019-08
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Working Paper: Phillips curves in the euro area (2019) Downloads
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