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Forecasting inflation

Listed author(s):
  • Stock, James H.
  • Watson, Mark W.

This paper investigates forecasts of U.S. inflation at the 12-month horizon. The starting point is the conventional unemployment rate Phillips curve, which is examined in a simulated out of sample forecasting framework. Inflation forecasts produced by the Phillips curve generally have been more accurate than forecasts based on other macroeconomic variables, including interest rates, money and commodity prices. These forecasts can however be improved upon using a generalized Phillips curve based on measures of real aggregate activity other than unemployment, especially a new index of aggregate activity based on 61 real economic indicators.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 44 (1999)
Issue (Month): 2 (October)
Pages: 293-335

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Handle: RePEc:eee:moneco:v:44:y:1999:i:2:p:293-335
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  11. Robert Shimer, 1999. "Why is the U.S. Unemployment Rate So Much Lower?," NBER Chapters,in: NBER Macroeconomics Annual 1998, volume 13, pages 11-74 National Bureau of Economic Research, Inc.
  12. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
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  14. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
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  16. Estrella, Arturo & Mishkin, Frederic S., 1997. "Is there a role for monetary aggregates in the conduct of monetary policy?," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 279-304, October.
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  18. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
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