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Is the Phillips curve dead? - results for Portugal

Publication Year 
This article assesses the forecasting performance over recent years of Phillips curves for Portugal. Phillips curves are estimated for a large variety of slack measures and evaluated in terms of their out-of-sample performance in real time. The issues of time variation of parameters and possible non-linearities are also explored. The findings suggest that there is no unique best specification for the Phillips curve over time, and therefore a set of these models, considering different slack measures, should be considered. Furthermore, there is some evidence of flattening of the traditional linear Phillips curve in recent years, which is possibly related to non-linearities in the model. Overall, the Phillips curve maintains some forecasting power for inflation when compared to a naïve benchmark.
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Journal (repec) 
Economic Studies