S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Bank of Finland Research Discussion Papers, Bank of Finland

No 22/2005:
Comparing alternative Phillips curve specifications: European results with survey-based expectations

Maritta Paloviita ()

Abstract: This paper examines inflation dynamics in Europe. Econometric specification tests with pooled European data are used to compare the empirical performance of the New Classical, New Keynesian and Hybrid specifications of the Phillips curve. Instead of imposing any specific form of expectations formation, di-rect measures, ie Consensus Economics survey data are used to proxy economic agents’ inflation expecta-tions. According to the results, the New Classical Phillips curve has satisfactory statistical properties. Moreover, the purely forward-looking New Keynesian Phillips curve is clearly outperformed by the New Classical and Hybrid Phillips curves. We interpret our results as indicating that the European inflation process is not purely forward-looking, and inflation cannot instantaneously adjust to changes in expecta-tions. Consequently, even allowing for possible non-rationality in expectations, a lagged inflation term enters the New Keynesian Phillips curve for inflation dynamics in Europe.

Keywords: Phillips curve; expectations; Europe; (follow links to similar papers)

JEL-Codes: C52; E31; (follow links to similar papers)

32 pages, October 11, 2005

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

0522netti.pdf    PDF-file
Download Statistics
This paper is forthcoming as:
Paloviita, Maritta, 'Comparing alternative Phillips curve specifications: European results with survey-based expectations', Applied Economics.



Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:bofrdp:2005_022 This page was generated on 2011-04-20 01:09:21