Factors influencing Federal Reserve forecasts of inflation
Purpose – This study aims to both test the asymmetric information hypothesis and explore the factors influencing the one- through four-quarter-ahead Federal Reserve inflation forecasts for 1983-2002. Design/methodology/approach – Encompassing tests are used to examine the asymmetric information hypothesis. In modeling the Federal Reserve inflation forecasts, the authors are mindful of alternative theories of inflation which emphasize such determinants as cost-push, demand-pull and inertial factors. Findings – First, the Federal Reserve inflation forecasts embody useful predictive information beyond that contained in the private forecasts. Second, with the private forecasts controlled for, the near-term Federal Reserve inflation forecasts make use of qualitative information, and the longer-term forecasts are influenced by the forecasts of growth in both unit labor costs and aggregate demand as well as the preceding-quarter inflation forecasts and monetary policy shifts. Research limitations/implications – The Federal Reserve forecasts are released to the public with a five-year lag and are currently available up to the fourth quarter of 2002. This limits the use of the most up-to-date forecasts desirable for this study. Originality/value – The factors influencing the Federal Reserve inflation forecasts are basically those emphasized publicly by monetary authorities. This finding points to the Fed's transparency and should thus help enhance its credibility with the public. Also, our results (which shed light on the predictive information in the Federal Reserve inflation forecasts not included in the private forecasts) are of value, since they can help the Fed better predict how inflation will respond to policy actions, and they can help the public form more informative inflationary expectations.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 37 (2010)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/jes.htm Email:
When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:37:y:2010:i:2:p:196-207. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.