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Do professional forecasters believe in the Phillips curve? evidence from the G7 countries
Author(s) -
Fendel Ralf,
Lis Eliza M.,
Rülke JanChristoph
Publication year - 2011
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.1172
Subject(s) - phillips curve , economics , unemployment , econometrics , survey data collection , business cycle , inflation (cosmology) , survey of professional forecasters , keynesian economics , macroeconomics , monetary policy , statistics , mathematics , physics , theoretical physics
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 rates as suggested by the wage and price Phillips curves. Four major findings stand out. First, we find that survey participants trust in both types of Phillips curve relationships. Second, we find evidence in favor of nonlinearities in the price Phillips curve. Third, we take into account a kink in the price Phillips curve to indicate that the slope of the Phillips curve differs during the business cycle. We find strong evidence of this feature in the data which confirms recent theoretical discussions. Fourth, we employ our data to the expectations‐augmented Phillips curve model. The results suggest that professional forecasters adopt this model when forecasting macroeconomic variables. Copyright © 2010 John Wiley & Sons, Ltd.