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Does a factor Phillips curve help? An evaluation of the predictive power for U.S. inflation

Published on May 1, 2011in Empirical Economics1.03
· DOI :10.1007/s00181-010-0352-0
Dandan Liu4
Estimated H-index: 4
(KSU: Kent State University),
Dennis W. Jansen21
Estimated H-index: 21
(A&M: Texas A&M University)
Abstract
This article evaluates various models’ predictive power for U.S. inflation rate using a simulated out-of-sample forecasting framework. The starting point is the traditional unemployment Phillips curve. We show that a factor Phillips curve model is superior to the traditional Phillips curve, and its performance is comparable to other factor models. We find that a factor AR model is superior to the factor Phillips curve model, and is the best bivariate or factor model at longer horizons. Finally, we investigate a New Keynesian Phillips curve model, and find that its forecasting performance dominates all other models at the longer horizons.
  • References (23)
  • Citations (4)
References23
Newest
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#2Rita S. Chu (NBER: National Bureau of Economic Research)H-Index: 1
Last.Charles Steindel (Federal Reserve Bank of New York)H-Index: 11
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#1James H. Stock (NBER: National Bureau of Economic Research)H-Index: 78
#2Mark W. Watson (NBER: National Bureau of Economic Research)H-Index: 74
#1Jordi Galí (NYU: New York University)H-Index: 57
#2Mark Gertler (NYU: New York University)H-Index: 62
Last.J. David López-Salido (Bank of Spain)H-Index: 13
view all 3 authors...
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