Inference and Forecasting Based on the Phillips Curve
- Inference and Forecasting Based on the Phillips Curve
- Kun Ho, Kim; Suna, Park
- Time-varying NAIRU; Random-walk Phillips curve; New-Keynesian Phillips curve; Uniform confidence band; Model validation; Inflation forecasting
- Issue Date
- 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.
- Files in This Item:
- Appears in Collections:
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.