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Econometrics 2018, 6(1), 6; doi:10.3390/econometrics6010006

Estimating Unobservable Inflation Expectations in the New Keynesian Phillips Curve

Department of Economics, University of Ottawa, 120 University Private, Ottawa, ON K1N 6N5, Canada
I would like to thank the participants to the brown bag workshop at the University of Ottawa for their comments and suggestions. I am also grateful to two anonymous reviewers for their constructive comments, which helped improve the quality of the paper. The usual disclaimer applies.
Received: 1 December 2017 / Revised: 27 January 2018 / Accepted: 31 January 2018 / Published: 5 February 2018
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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. View Full-Text
Keywords: Phillips curve; expectations; survey data; Bayesian estimation Phillips curve; expectations; survey data; Bayesian estimation

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Rondina, F. Estimating Unobservable Inflation Expectations in the New Keynesian Phillips Curve. Econometrics 2018, 6, 6.

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