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Efficient Inflation Forecasts: An International Comparison

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  • Alex Kane
  • Leonard Rosenthal

Abstract

This paper addresses the question of whether nominal Eurocurrency interest rates provide significant information about expected inflation. To test this question two sets of inflation forecasts for the U.S. and five European countries were generated: 1) from time series of past inflation rates;2) by forecasting real rates from time series of past real rates and subtracting these forecasts from nominal rates. The accuracy of the two sets of inflation forecasts was compared. The results indicate that nominal Eurocurrency rates provide valuable marginal information about expected inflation for the U.S. and U.K., but not for the other European countries.

Suggested Citation

  • Alex Kane & Leonard Rosenthal, 1985. "Efficient Inflation Forecasts: An International Comparison," NBER Working Papers 1542, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1542
    Note: ME
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    1. Zvi Bodie & Alex Kane & Robert L. McDonald, 1983. "Why Are Real Interest Rates So High?," NBER Working Papers 1141, National Bureau of Economic Research, Inc.
    2. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-282, June.
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