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A Century of Inflation Forecasts

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Author Info

  • Antonello D'Agostino

    (European Central Bank)

  • Paolo Surico

    (London Business School and CEPR)

Abstract

We investigate inflation predictability in the United States across the monetary regimes of the twentieth century. The forecasts based on money growth and output growth were significantly more accurate than the forecasts based on past inflation only during the regimes associated with neither a clear nominal anchor nor a credible commitment to fight inflation. These include the years from the outbreak of World War II in 1939 to the implementation of the Bretton Woods Agreements in 1951 and from Nixon's closure of the gold window in 1971 to the end of Volcker's disinflation in 1983. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00235
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Bibliographic Info

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

Volume (Year): 94 (2012)
Issue (Month): 4 (November)
Pages: 1097-1106

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Handle: RePEc:tpr:restat:v:94:y:2012:i:4:p:1097-1106

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Web page: http://mitpress.mit.edu/journals/

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

Related research

Keywords: inflation; predictability; monetary regimes; Phillips curve; time-varying models;

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References

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  1. Sangjoon Kim & Neil Shephard & Siddhartha Chib, 1996. "Stochastic Volatility: Likelihood Inference And Comparison With Arch Models," Econometrics 9610002, EconWPA.
  2. Timothy Cogley & Thomas Sargent, . "Drifts and Volatilities: Monetary Policies and Outcomes in the Post WWII US," Working Papers 2133503, Department of Economics, W. P. Carey School of Business, Arizona State University.
  3. James H. Stock & Mark W. Watson, 1994. "Evidence on Structural Instability in Macroeconomic Time Series Relations," NBER Technical Working Papers 0164, National Bureau of Economic Research, Inc.
  4. Thomas J. Sargent & Paolo Surico, 2011. "Two Illustrations of the Quantity Theory of Money: Breakdowns and Revivals," American Economic Review, American Economic Association, vol. 101(1), pages 109-28, February.
  5. Antonello D'Agostino & Luca Gambetti & Domenico Giannone, 2013. "Macroeconomic forecasting and structural change," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(1), pages 82-101, 01.
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Cited by:
  1. Barbara Rossi, 2011. "Advances in Forecasting Under Instability," Working Papers 11-20, Duke University, Department of Economics.

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