Abstract
This paper utilizes the information in the inflation-indexed bonds market to estimate the New Keynesian Phillips Curve for the UK using an unobserved component approach. The main advantage of this approach comes from using the Kalman filter to explicitly estimate the unobserved expected inflation from the observed break-even inflation rates – the yield difference between the inflation-indexed bonds and the nominal bonds. Our results show that the expected inflation estimated from the unobserved component model plays a significant role in explaining the inflation dynamics in the UK. The evidence also suggests that the estimated inflation expectations are better able to capture the evolution of actual inflation process as compared to the break-even inflation rate as a proxy for expected inflation.
Acknowledgement
Much thanks to N. Kundan Kishor and anonymous referees for all the useful comments and suggestions.
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Artikel in diesem Heft
- Advances
- Luxury consumption, precautionary savings and wealth inequality
- Unemployment insurance with limited commitment wage contracts and savings
- The marriage unemployment gap
- Fertility and labor supply of the old with pay-as-you-go pension and child allowances
- Optimal pensions in aging economies
- Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market
- An empirical note on the long-run relationship between education and religiosity in Christian countries
- Accounting for changing returns to experience
- Development accounting with intermediate goods
- The post-crisis slump in Europe: a business cycle accounting analysis
- Rational bubbles in a monetary economy
- Capital controls as a credit policy tool in a small open economy
- Labor income share and imperfectly competitive product market
- Macroeconomic costs of gender gaps in a model with entrepreneurship and household production
- Contributions
- Comparing the effects of discretionary tax changes between the US and the UK
- Erratum
- Erratum to: Life-cycle consumption, precautionary saving, and risk sharing: an integrated analysis using household panel data
Artikel in diesem Heft
- Advances
- Luxury consumption, precautionary savings and wealth inequality
- Unemployment insurance with limited commitment wage contracts and savings
- The marriage unemployment gap
- Fertility and labor supply of the old with pay-as-you-go pension and child allowances
- Optimal pensions in aging economies
- Estimating the New Keynesian Phillips Curve for the UK: evidence from the inflation-indexed bonds market
- An empirical note on the long-run relationship between education and religiosity in Christian countries
- Accounting for changing returns to experience
- Development accounting with intermediate goods
- The post-crisis slump in Europe: a business cycle accounting analysis
- Rational bubbles in a monetary economy
- Capital controls as a credit policy tool in a small open economy
- Labor income share and imperfectly competitive product market
- Macroeconomic costs of gender gaps in a model with entrepreneurship and household production
- Contributions
- Comparing the effects of discretionary tax changes between the US and the UK
- Erratum
- Erratum to: Life-cycle consumption, precautionary saving, and risk sharing: an integrated analysis using household panel data