Working paper/research report

Publication year: 2005

URL: https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=ae722cec51627b85aa2726249f329fabae81c241

Abstract: 

This paper evaluates the ability of the standard Calvo model of staggered price setting to replicate inflation dynamics in the UK. The New Keynesian model specifies inflation as the present-value of future real marginal cost. We exploit forecasts of future real marginal cost generated by VAR models to assess the extent to which the model matches the behavior of actual inflation. In accordance to the literature, the model fits well at first sight. A set of bootstrapped confidence bands, however, reveals that this result is consistent with both a well fitting and a poorly fitting model. Extending the model to the open economy greatly improves the performance of the forward-looking model.

Harvard Citation style: Tillmann, P. (2005) Does the forward-looking Phillips Curve explain UK inflation?. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=ae722cec51627b85aa2726249f329fabae81c241

APA Citation style: Tillmann, P. (2005). Does the forward-looking Phillips Curve explain UK inflation?. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=ae722cec51627b85aa2726249f329fabae81c241