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Tests of the Specification and Predictive Accuracy of Nonnested Models of Inflation

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  • Stockton, David J
  • Struckmeyer, Charles S

Abstract

The recent volatility of inflation has provided considerable data to distinguish among competing theories of inflation. The key competing models are the expectations-augmented Phillips curve, a monetarist equation, and the rational expectations model. This paper replicates the results of earlier studies and tests their relative performance using nonnested hypothesis tests. In addition, the forecast accuracy of each of the alternative specification is evaluated using the methodology developed by Fair (1984). This method seeks to identify forecast uncertainty arising from the model's error term, coefficient estimates, exogenous variable forecasts, and possible misspecification. Copyright 1989 by MIT Press.

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  • Stockton, David J & Struckmeyer, Charles S, 1989. "Tests of the Specification and Predictive Accuracy of Nonnested Models of Inflation," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 275-283, May.
    • Handle: RePEc:tpr:restat:v:71:y:1989:i:2:p:275-83
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    Cited by:

    1. Kennedy, James E., 1998. "An Analysis of Time-Series Estimates of Capacity Utilization," Journal of Macroeconomics, Elsevier, vol. 20(1), pages 169-187, January.
    2. Reifschneider, David L. & Stockton, David J. & Wilcox, David W., 1997. "Econometric models and the monetary policy process," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 1-37, December.
    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 tour ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.
    4. John P. Judd & Bharat Trehan, 1990. "What does unemployment tell us about future inflation?," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 15-26.

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