Economics, Econometrics and Finance
4 years ago

Study confirms forward-looking behavior dominates inflation predictions, impacting economic policies.

RePEc: Research Papers in Economics
Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve
Jordi Galı́, Mark Gertler, J. David López‐Salido

Paper Summary

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The hybrid New Keynesian Phillips curve links inflation to real marginal cost, expected future inflation, and past inflation. Results show that expected future inflation has a bigger impact on inflation than past inflation. Different methods were used to estimate the model, and the findings remained consistent. This suggests that forward-looking behavior plays a significant role in predicting inflation.