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An Evaluation of the Forecast Performance of Alternative Models of Inflation

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  • Stockton, David J
  • Glassman, James E
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    Abstract

    The forecast performances of three groups of models of the inflation process are evalu-ated in this paper: ra tional expectations models with instantaneous market clearing, monetarist models , and expectations-augmented Phillips curves. The dynamic simulations performed for the intervals between 1977 and 1984 are somewhat discouraging for all three theories. The variation in forecasting performance within model groups often exc eeded the variation in performance across model groups. Nevertheless, the Philli ps curve formulation rarely performed worse than the other two models, and in th e 1981 to 1984 period it performed substantially better than the alternative mod els of inflation. Copyright 1987 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 69 (1987)
    Issue (Month): 1 (February)
    Pages: 108-17

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    Handle: RePEc:tpr:restat:v:69:y:1987:i:1:p:108-17

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Ben Smit & Stan du Plessis, 2001. "Inflation and the role of wages in South Africa: A co-integration analysis," Working Papers 01053, University of Cape Town, Development Policy Research Unit.
    2. Meyler, Aidan & Kenny, Geoff & Quinn, Terry, 1998. "Forecasting irish inflation using ARIMA models," MPRA Paper 11359, University Library of Munich, Germany.
    3. Silva Lopes, Artur, 1994. "A "hipótese das expectativas racionais": teoria e realidade (uma visita guiada à literatura até 1992)
      [The "rational expectations hypothesis": theory and reality (a guided to      ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.
    4. Fofana, Abdulai & Toma, Luiza & Moran, Dominic & Gunn, George J. & Stott, Alistair W., 2009. "Measuring the economic benefits and costs of Bluetongue virus outbreak and control strategies in Scotland," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51052, Agricultural Economics Society.
    5. Feridun, Mete, 2006. "Forecasting Inflation in Developing Nations: The Case of Pakistan," MPRA Paper 1024, University Library of Munich, Germany, revised 2006.
    6. John A. Tatom, 1990. "The P-star approach to the link between money and prices," Working Papers 1990-008, Federal Reserve Bank of St. Louis.
    7. Mazumder, Sandeep, 2011. "Cost-based Phillips Curve forecasts of inflation," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 553-567.
    8. Yash P. Mehra, 1993. "Unit labor costs and the price level," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 35-52.
    9. Yash P. Mehra, 1989. "Wage growth and the inflation process: an empirical note," Working Paper 89-01, Federal Reserve Bank of Richmond.
    10. Andrew Ang & Geert Bekaert & Min Wei, 2005. "Do Macro Variables, Asset Markets or Surveys Forecast Inflation Better?," NBER Working Papers 11538, National Bureau of Economic Research, Inc.
    11. Luojia Hu & Maude Toussaint-Comeau, 2010. "Do labor market activities help predict inflation?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 52-63.
    12. Yash P. Mehra, 2004. "Predicting the recent behavior of inflation using output gap-based Phillips curves," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 65-88.
    13. Yash Mehra, 2000. "Wage-price dynamics : are they consistent with cost push?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 27-43.
    14. John W. Galbraith & Greg Tkacz, 2007. "How Far Can Forecasting Models Forecast? Forecast Content Horizons for Some Important Macroeconomic Variables," Working Papers 07-1, Bank of Canada.
    15. Olesya V. Grishchenko & Joel M. Vanden & Jianing Zhang, 2013. "The informational content of the embedded deflation option in TIPS," Finance and Economics Discussion Series 2013-24, Board of Governors of the Federal Reserve System (U.S.).

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