Joint compound is the answer to float the wall out. If it were me, I would take a more radical approach and jab a sawsall blade throught the drywall at the top and bottom of the wall, and cut the 2x4 behind the drywall. It is probally bowed and causing the buldge. Once cut, the wall would relax a bit and the bulge might come out. Sometime you can cut it in the middle of the wall too to get the bow out. Look to see where the drywall comes out the most, if in the middle, cut it there. It won't do any structaul damage cutting one 2x4.
Just another idea.....George............
