the euro area: the older expectations-augmented Phillips curve and the new Keynesian Phillips curve. The main focus is on … the role of expectations and comparison of the two theories. Instead of imposing rational expectations, an alternative and … in principle less restrictive approach is applied to operationalising expectations. Direct measures of inflation …

This paper analyses the role of inflation expectations in the euro area. On one hand, the question is how inflation … expectations affect both inflation and output, and, on the other hand, how inflation expectations reflect developments in these … variables. The analyses make use of a simple VAR model of inflation, inflation expectations and the output gap that allows for …

consistent with rational expectations once learning is complete. When past performance governs the choice of forecast model …. While average output and inflation result the same as under rational expectations, higher moments differ substantially …

selection of the appropriate nonlinear time series representation (useful, for example, in both forecasting and policy guidance …

and inflation indexation, that are typically needed in monetary models with rational expectations to match the persistence … replaces rational expectations, the estimated degrees of habits and indexation drop near zero. This finding suggests that … persistence arises in the model economy mainly from expectations and learning. The posterior model probabilities show that the …

, taking as a benchmark the forecasting errors generated by the quarterly model used by the Bank of Italy in the 1990s. We … Kalman filter approach, in order to improve the forecasts. Then we look at the sample correlations among forecasting errors …