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The Low Predictive Power of Simple Phillips Curves in Chile: A Real-Time Evaluation

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  • Pablo Pincheira
  • Hernán Rubio

Abstract

In this article we explore the existence, robustness and size of the contribution that several activity measures make when predicting inflation in Chile. For that purpose, we use backward-looking Phillips curves and make use of a real-time database to get an evaluation of predictive ability consistent with the uncertainty faced by policy-makers when making decisions in real time. Our main results confirm those shown by the recent literature in the USA: the predictive contribution of the GDP measures considered here is episodic, unstable and of moderate size. These results are robust to the estimation being made with either revised or real-time data. This holds true in a context in which final and first vintage GDP measures are shown to differ significantly and to generate quite different inflation forecasts.

Suggested Citation

  • Pablo Pincheira & Hernán Rubio, 2010. "The Low Predictive Power of Simple Phillips Curves in Chile: A Real-Time Evaluation," Working Papers Central Bank of Chile 559, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:559
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    References listed on IDEAS

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    Cited by:

    1. Ercio Muñoz S. & Alfredo Pistelli M., 2010. "¿Tienen los Terremotos un Impacto Inflacionario en el Corto Plazo? Evidencia para una Muestra de Países," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(2), pages 113-127, April.
    2. Horacio A. Aguirre & Emilio F. Blanco, 2015. "Credit and Macroprudential Policy in an Emerging Economy: a Structural Model Assessment," BIS Working Papers 504, Bank for International Settlements.
    3. Medel, Carlos, 2015. "Inflation Dynamics and the Hybrid Neo Keynesian Phillips Curve: The Case of Chile," MPRA Paper 62609, University Library of Munich, Germany.

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