Estimating open economy Phillips curves for the euro area with directly measured expectations

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dc.contributor Suomen Pankki Paloviita, Maritta 2014-09-22T07:58:03Z 2014-09-22T07:58:03Z 2008
dc.identifier.isbn 978-952-462-448-0
dc.identifier.isbn 978-952-462-449-7
dc.identifier.issn 1456-6184
dc.description.abstract This paper examines euro area inflation dynamics by estimating open economy New Keynesian Phillips curves based on the assumption that all imports are intermediate goods. Instead of imposing rational expectations a priori, Consensus Economics survey data and OECD inflation forecasts are used to proxy inflation expectations. The results suggest that, compared with a closed economy New Keynesian Phillips curve, euro area inflation dynamics are better captured by the open economy specification. Moreover, in the open economy context, and even if we allow for persistence in expectations, the hybrid specification of the New Keynesian Phillips curve is needed in order to capture the euro area inflation process properly. We also provide some evidence that in recent years of low and stable inflation, euro area inflation dynamics have become more forward-looking and the link between inflation and domestic demand has weakened (ie the euro area Phillips curve has flattened). On the other hand, in low-inflation euro area countries the inflation process seems to have been more forward-looking already since the early 1980s
dc.format.extent 35 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject inflaatio
dc.subject avoin talous
dc.subject euroalue
dc.subject odotukset
dc.subject Phillipsin käyrä
dc.subject SP
dc.subject RP
dc.title Estimating open economy Phillips curves for the euro area with directly measured expectations
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807271 Bank of Finland Research Discussion Papers
dc.series.year 2008
dc.series.number 16/2008
dc.series.sortingnumber 0016 1.6.2008
dc.description.publication Published in New Zealand Economic Papers, Vol 43, Issue 3, December 2009: 233-254

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