We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by...

Based on a panel of German professional forecasts for 1970 to 2003 we find that growth and inflation forecasts are unbiased and weakly, but not strongly efficient. Besides the effect of diverging forecasting dates, no other substantial differences in forecasting quality are found among...

This paper empirically compares sticky-price and sticky-information Phillips curves considering inflation dynamics in six countries (US, UK, Germany, France, Canada, and Japan). We evaluate the models' abilities to match empirical second moments of inflation. Under baseline calibrations, the two...

This paper presents experimental evidence from a monetary sticky price economy in which output and inflation depend on expected future inflation. With rational inflation expectations, the economy does not generate persistent deviations of output and inflation in response to a monetary shock. In...

The output gap (measuring the deviation of output from its potential) is a crucial concept in the monetary policy framework, indicating demand pressure that generates inflation. The output gap is also an important variable in itself, as a measure of economic fluctuations. However, its definition...

In this paper we develop a new, simple and, at the same time, general method for the estimation of the rate of capacity utilization (CU). This method draws on the standard theory of economic growth and makes use of the structural vector autoregression (SVAR) system of equations estimating...

This paper computes the welfare costs of inflation in an estimated dynamic stochastic general equilibrium model of the U.S. economy. Both steady state and transitional welfare results are reported. I find that a 10 percent inflation entails a steady state welfare cost of 1.9 % of annual...

Recent studies by Gali and Gertler (1999) and Sbordone (2002) conclude that a theoretical inflation series implied by the forward-looking New Keynesian pricing model of Calvo (1983) fits post-1960 U.S. inflation closely. Their theoretical inflation series is conditional on (i) a reduced-form...

For decades, the academic literature has focused on three survey measures of expected inflation: the Livingston Survey, the Survey of Professional Forecasters, and the Michigan Survey. While these measures have been useful in developing models of forecasting inflation, the data are low frequency...

Output gap is generally used in assessing both the inflationary pressures and the cyclical position of a nation’s economy. However, this variable is not observable and must be estimated. In this paper, we accomplish two tasks. First, we estimate the output gap for the United Arab Emirates...