Simulating Inflation Forecasting in Real-Time
AbstractThis paper simulates out-of-sample inflation forecasting for Germany, the UK, and the US. In contrast to other studies, we use output gaps estimated with unrevised real-time GDP data. This exercise assumes an information set similar to that available to a policymaker at a given point in time since GDP data is subject to sometimes substantial revisions. In addition to using real-time datasets for the UK and the US, we employ a dataset for real-time German GDP data not used before. We find that Phillips curves based on ex post output gaps generally improve the accuracy of inflation forecasts compared to an AR(1) forecast but that real-time output gaps often do not help forecasting inflation. This raises the question how operationally useful certain output gap estimates are for forecasting inflation.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/52.
Date of creation: 01 Feb 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-CBA-2010-03-28 (Central Banking)
- NEP-EEC-2010-03-28 (European Economics)
- NEP-FOR-2010-03-28 (Forecasting)
- NEP-MAC-2010-03-28 (Macroeconomics)
- NEP-MON-2010-03-28 (Monetary Economics)
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- Croonenbroeck, Carsten & Stadtmann, Georg, 2012. "Evaluating Phillips curve based inflation forecasts in Europe: A note," Discussion Papers 329, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
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