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...

We show that one should not use the one-sided Hodrick-Prescott filter (HP-1s) as the real-time version of the two-sided Hodrick-Prescott filter (HP-2s): First, in terms of the extracted cyclical component, HP-1s fails to remove low-frequency fluctuations to the same extent as HP-2s. Second,...