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We illustrate the importance of placing model-consistent restrictions on expectations in the estimation of forward-looking Euler equations. In two-stage limited-information settings where first-stage estimates are used to proxy for expectations, parameter estimates can differ substantially,...
Persistent link: https://www.econbiz.de/10009153344
This paper discusses the likely evolution of U.S. inflation in the near and medium term on the basis of (1) past U.S. experience with very low levels of inflation, (2) the most recent Japanese experience with deflation, and (3) recent U.S. micro evidence on downward nominal wage rigidity. Our...
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This paper provides an array of empirical evidence bearing on potentially important changes in the dynamics of U.S. inflation. We examine the overall performance of Phillips curves relative to some well-known benchmarks, the efficiency with which the Federal Reserve’s Greenbook forecasts of...
Persistent link: https://www.econbiz.de/10003842109
We compare estimates of the New Keynesian Phillips Curve (NKPC) when the curve is specified in two different ways. In the standard difference equation (DE) form, current inflation is a function of past inflation, expected future inflation, and real marginal costs. The alternative closed form...
Persistent link: https://www.econbiz.de/10003914086
A large set of financial variables has only limited power to predict a latent factor common to the year-ahead forecast errors for real Gross Domestic Product (GDP) growth, the unemployment rate, and Consumer Price Index (CPI) inflation for three sets of professional forecasters: the Federal...
Persistent link: https://www.econbiz.de/10012930591