
- P-ISSN 2586-2995
- E-ISSN 2586-4130
KDI Journal of Economic Policy. Vol. 38, No. 2, May 2016, pp. 1-20
https://doi.org/10.23895/kdijep.2016.38.2.1
In this paper, we conduct uniform inference of two widely used versions of the Phillips curve, specifically the random-walk Phillips curve and the New-Keynesian Phillips curve (NKPC). For both specifications, we propose a potentially time-varying natural unemployment (NAIRU) to address the uncertainty surrounding the inflation-unemployment trade-off. The inference is conducted through the construction of what is known as the uniform confidence band (UCB). The proposed methodology is then applied to point-ahead inflation forecasting for the Korean economy. This paper finds that the forecasts can benefit from conducting UCB-based inference and that the inference results have important policy implications.
Timevarying NAIRU, Randomwalk Phillips curve, NewKeynesian Phillips curve, Uniform confidence band, Model validation, Inflation forecasting
C12, C13, C14