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Abstract

We investigate inflation predictability in the United States across the monetary regimes of the XXth 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8292.

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Date of creation: Mar 2011
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Handle: RePEc:cpr:ceprdp:8292

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Related research

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

Other versions of this item:

Find related papers by JEL classification:

• E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
• E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
• E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

This paper has been announced in the following NEP Reports:

• NEP-ALL-2011-04-02 (All new papers)
• NEP-CBA-2011-04-02 (Central Banking)
• NEP-FOR-2011-04-02 (Forecasting)
• NEP-HIS-2011-04-02 (Business, Economic & Financial History)
• NEP-HPE-2011-04-02 (History & Philosophy of Economics)
• NEP-MAC-2011-04-02 (Macroeconomics)
• NEP-MON-2011-04-02 (Monetary Economics)

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1. 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.
   
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3. 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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4. 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.
   
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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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