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When can we forecast inflation?

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Author Info
Jonas D. M. Fisher
Chin Te Liu
Ruilin Zhou

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Abstract

This article reassesses recent work that has challenged the usefulness of inflation forecasts. The authors find that inflation forecasts were informative in 1977-84 and 1993-2000, but less informative in 1985-92. They also find that standard forecasting models, while generally poor at forecasting the magnitude of inflation, are good at forecasting the direction of change of inflation.

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Publisher Info
Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2002)
Issue (Month): Q I ()
Pages: 32-44
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Handle: RePEc:fip:fedhep:y:2002:i:qi:p:32-44:n:v.26no.1

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Related research
Keywords: Inflation (Finance) ; Phillips curve;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michael D. Bordo & Anna J. Schwartz, 1997. "Monetary Policy Regimes and Economic Performance: The Historical Record," NBER Working Papers 6201, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 869-902, August. [Downloadable!] (restricted)
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  3. Gordon, Robert J, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter. [Downloadable!] (restricted)
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  4. James H. Stock & Mark W. Watson, 2001. "Forecasting output and inflation: the role of asset prices," Proceedings, Federal Reserve Bank of San Francisco, issue Mar. [Downloadable!]
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  5. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11. [Downloadable!]
  6. Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 463-497, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Agostino Consolo, 2006. "Forecasting measures of inflation for the Estonian economy," Bank of Estonia Working Papers 2006-03, Bank of Estonia, revised 12 Nov 2006. [Downloadable!]
  2. Rossi, Barbara & Giacomini, Raffaella, 2006. "Detecting and Predicting Forecast Breakdowns," Working Papers 06-01, Duke University, Department of Economics. [Downloadable!]
    Other versions:
  3. Marie Diron & Benoît Mojon, 2008. "Are inflation targets good inflation forecasts?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 33-45. [Downloadable!]
  4. Manzan, Sebastiano & Zerom, Dawit, 2009. "Are Macroeconomic Variables Useful for Forecasting the Distribution of U.S. Inflation?," MPRA Paper 14387, University Library of Munich, Germany. [Downloadable!]
  5. Tito Nícias Teixeira da Silva Filho, 2008. "Searching for the Natural Rate of Unemployment in a Large Relative Price Shocks' Economy: the Brazilian Case," Working Papers Series 163, Central Bank of Brazil, Research Department. [Downloadable!]
  6. David Gruen & Tim Robinson & Andrew Stone, 2002. "Output Gaps in Real Time: Are They Reliable Enough to Use for Monetary Policy?," RBA Research Discussion Papers rdp2002-06, Reserve Bank of Australia. [Downloadable!]
  7. G. Ascari & Emanuela Marrocu, 2003. "Forecasting inflation: a comparison of linear Phillips curve models and nonlinear time serie models," Working Paper CRENoS 200307, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  8. Tim Robinson & Andrew Stone & Marileze van Zyl, 2003. "The Real-time Forecasting Performance of Phillips Curves," RBA Research Discussion Papers rdp2003-12, Reserve Bank of Australia. [Downloadable!]
  9. Todd E. Clark & Michael W. McCracken, 2006. "Combining forecasts from nested models," Research Working Paper RWP 06-02, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  10. Charles L. Evans & Chin Te Liu & Genevieve Pham-Kanter, 2002. "The 2001 recession and the Chicago Fed National Index: identifying business cycle turning points," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 26-43. [Downloadable!]
  11. James H. Stock & Mark W. Watson, 2006. "Why Has U.S. Inflation Become Harder to Forecast?," NBER Working Papers 12324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Todd E. Clark & Michael W. McCracken, 2003. "The predictive content of the output gap for inflation : resolving in-sample and out-of-sample evidence," Research Working Paper RWP 03-06, Federal Reserve Bank of Kansas City. [Downloadable!]
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  13. Doyle, Matthew, 2006. "Empirical Phillips Curves in OECD Countries: Has There Been A Common Breakdown?," Staff General Research Papers 12684, Iowa State University, Department of Economics. [Downloadable!]
  14. Andrew Ang & Geert Bekaert & Min Wei, 2006. "Do macro variables, asset markets, or surveys forecast inflation better?," Finance and Economics Discussion Series 2006-15, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  15. Nicholai Benalal & Juan Luis Diaz del Hoyo & Bettina Landau & Moreno Roma & Frauke Skudelny, 2004. "To aggregate or not to aggregate? Euro area inflation forecasting," Working Paper Series 374, European Central Bank. [Downloadable!]
  16. Lanne, Markku & Luoma, Arto & Luoto, Jani, 2008. "A Naïve Sticky Information Model of Households’ Inflation Expectations," MPRA Paper 8663, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  17. Daniel L. Thornton, 2009. "How did we get to inflation targeting and where do we go now? a perspective from the U.S. experience," Working Papers 2009-038, Federal Reserve Bank of St. Louis. [Downloadable!]
  18. Orphanides, Athanasios & van Norden, Simon, 2005. "The Reliability of Inflation Forecasts Based on Output Gap Estimates in Real Time," CEPR Discussion Papers 4830, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  19. James M. Nason, 2006. "Instability in U.S. inflation: 1967-2005," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 39-59. [Downloadable!]
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