Inference and Forecasting Based on the Phillips Curve
In this paper, we conduct uniform inference of two widely used versions of the Phillips curve, specifically the random-walk Phillips curve and the New-Keynesian Phillips curve (NKPC). For both specifications, we propose a potentially time-varying natural unemployment (NAIRU) to address the uncertain...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Korea Development Institute
2016-05-01
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| Series: | KDI Journal of Economic Policy |
| Subjects: | |
| Online Access: | https://doi.org/10.23895/kdijep.2016.38.2.1 |
| Summary: | In this paper, we conduct uniform inference of two widely used versions of the Phillips curve, specifically the random-walk Phillips curve and the New-Keynesian Phillips curve (NKPC). For both specifications, we propose a potentially time-varying natural unemployment (NAIRU) to address the uncertainty surrounding the inflation-unemployment trade-off. The inference is conducted through the construction of what is known as the uniform confidence band (UCB). The proposed methodology is then applied to point-ahead inflation forecasting for the Korean economy. This paper finds that the forecasts can benefit from conducting UCB-based inference and that the inference results have important policy implications. |
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| ISSN: | 2586-2995 2586-4130 |