a complex nonparametric model of the semi-structural New-Keynesian Phillips curve for
the U.S. estimated by computational intensive Bayesian methods. Our approach avoids the
restrictive parametric assumptions of previous studies and by being formulated in frequency
domain it requires only straightforward and transparent calculations. We do not formulate a
structural model of output and inflation, but the relationship between output and inflation that
we find would be consistent with response of New Keynesian models to demand shocks, not
technology shocks.
The structure of the paper is the following: First, we motivate and describe the approach to
our underlying inflation measure. Second, the cyclical comovement of the underlying inflation
measure with output from 1996 to 2012 is analyzed. Sensitivity analysis, extension to a
longer sample and further properties of underlying inflation follow before we conclude.