Title: Phillips curves
Authors: Shayan Zakipour-Saber - Queen Mary University (United Kingdom)
Luca Onorante - European Central Bank (Germany) [presenting]
Laura Moretti - Central Bank of Ireland (Ireland)
Abstract: A robust estimation of the Phillips curve is performed, taking into account the different specifications existing in the literature, the uncertainty in the measurement of variables and the potential non-linearities and structural changes deriving from the Great Recession. We extend the existing literature by adding model specifications, accounting for different measures of inflation expectations and external factors, and choosing different specifications on the basis of their out-of-sample forecasting performance. Additionally, we attempt at identifying the most important determinants of inflation over the sample. Finally, we explore the consequences of our findings for monetary policy: we overall conclude that there is scope for action of monetary policy, but the objective of inflation close but below 2 percent will also crucially depend on the (largely exogenous) developments of food and energy prices, and most crucially on expectations.