Inflation dynamics in the euro area and the role of expectations : further results

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dc.contributor Suomen Pankki Paloviita, Maritta 2014-09-22T07:58:19Z 2014-09-22T07:58:19Z 2004
dc.identifier.isbn 952-462-160-6
dc.identifier.issn 0785-3572
dc.description.abstract This paper examines the empirical performance of the New Keynesian Phillips curve and its hybrid specification in the euro area. Instead of imposing rational expectations, direct measures, ie OECD forecasts, are used as empirical proxies for economic agents inflation expectations.Real marginal costs are proxied by three different measures.The results suggest that OECD inflation forecasts perform relatively well as a proxy for inflation expectations in the euro area, since under this approach the European inflation process can be modeled using the forward-looking New Keynesian Phillips curve.However, inflation can be modeled even more accurately by the hybrid Phillips curve.Thus, even allowing for possible non-rationality in expectations, the additional lagged inflation term is needed in the New Keynesian Phillips relation.In this approach, the output gap turns out to be at least as good a proxy for real marginal costs as the labor income share.Moreover, the inflation process seems to have become more forward-looking in the recent years of low and stable inflation. Key words: Phillips curve, expectations, euro area JEL classification numbers: E31, C52
dc.format.extent 24 s.
dc.language.iso eng
dc.subject Phillipsin käyrä
dc.subject inflaatio
dc.subject odotukset
dc.subject euroalue
dc.subject SP
dc.title Inflation dynamics in the euro area and the role of expectations : further results
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807375
dc.subject.jel E31
dc.subject.jel C52 Suomen Pankin keskustelualoitteita
dc.series.year 2004
dc.series.number 21/2004
dc.series.sortingnumber 21 1.11.2004
dc.description.publication Published in Empirical Economics, Volume 31, No. 4, November 2006: 847-860

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