We develop a theoretical model that features a business cycle-dependent relation between out- put, price inflation and … inflation expectations, augmenting the model by Svensson (1997) with a nonlinear Phillips curve that reflects the rationale … pronounced convex relationship between inflation and the output gap, meaning that the coefficient in the Phillips curve on the …

equally in terms of parameter estimation. Based on this feature we show how to extract common trends and cycles from the data …

the model's output gap as a benchmark, we further show that common output gap estimation methods exhibit a systematic bias …