Model Specification and Inflation Forecast Uncertainty *

  title={Model Specification and Inflation Forecast Uncertainty *},
  author={Gunnar B{\aa}rdsen and Eilev S. Jansen and Ragnar Nymoen},
– Three classes of inflation models are discussed: Standard Phillips curves, New Keynesian Phillips curves and Incomplete Competition Models. Their relative merits in explaining and forecasting inflation are investigated theoretically and empirically. We establish that Standard Phillips-curve forecasts are robust to types of structural breaks that harm the Incomplete Competion model forecasts, but exaggerate forecast uncertainty in periods with no breaks. As the potential biases in after-break… CONTINUE READING