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...

Some observers have worried that under or over-estimating the output gap may unnecessarily induce tightening or loosening of monetary conditions, causing real fluctuations. To investigate the relationship between the output gap and inflation, we examine models of inflation that do and do not use...

As both the natural level of output and the New Keynesian output gap cannot be observed in practice, there is quite some debate on the question how these variables look like in practice. Rather than taking the standard approach of using a time trend or the HP-filter to obtain estimates of these...

This paper uses monthly survey data for the G7 countries for the time period 1989 - 2007 to explore the link between expectations on nominal wages, prices and unemployment rate as suggested by the traditional and Samuelson-and-Solow-type Phillips curve. Three major findings stand out: First, we...

We run out-of-sample forecasts for the inflation rate of 15 euro-zone countries using a NAIRU Phillips curve and a nai͏̈ve reference model. Comparisons show that the nai͏̈ve model returns better forecasts in almost all cases. We provide evidence that the Phillips curves' goodness of fit is...

This paper uses monthly survey data for the G7 countries for the time period 1989 - 2007 to explore the link between expectations on nominal wages, prices and unemployment rate as suggested by the traditional and Samuelson-and-Solow-type Phillips curve. Three major findings stand out: First, we...

In this paper, we study the fit and the predictive performance of the Phillips curve for euro area inflation with regard to different inflation series, time periods and predictor variables, notably different global factors. We compare the relative performance of a large set of alternative global...

We show that the New Keynesian Phillips Curve (NKPC) outperforms standard bench marks in forecasting U.S. inflation once frequency-domain information is taken into account. We do so by decomposing the time series (of inflation and its predictors) into several frequency bands and forecasting...

We find that it does, but choosing the right specification is not trivial. We unveil notable model instability, with breaks in the performance of most simple Phillips curves. Euro area inflation was particularly hard to forecast in the run-up to the EMU and after the sovereign debt crisis, when...

Are survey-based forecasts unbeatable? They are not. This paper introduces online price indices to forecast the Consumer Price Index. We find that online price indices anticipate changes in official inflation trends more than one month in advance. Our baseline one-month and two-month-ahead...