Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129353
Authors: 
Kabukçuoğlu, Ayşe
Martínez-García, Enrique
Year of Publication: 
2015
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1520
Abstract: 
We evaluate the performance of inflation forecasts based on the open-economy Phillips curve by exploiting the spatial pattern of international propagation of inflation. We model these spatial linkages using global inflation and either domestic slack or oil price fluctuations, motivated by a novel interpretation of the forecasting implications of the workhorse open-economy New Keynesian model (Martínez-García and Wynne (2010), Kabukcuoglu and Martínez-García (2014)). We find that incorporating spatial interactions yields significantly more accurate forecasts of local inflation in 14 advanced countries (including the U.S.) than a simple autoregressive model that captures only the temporal dimension of the inflation dynamics.
Subjects: 
Inflation Dynamics
Open-Economy Phillips Curve
Forecasting
JEL: 
C21
C23
C53
F41
F62
Document Type: 
Working Paper

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