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Phillips curve inflation forecasts

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  • James H. Stock
  • Mark W. Watson

Abstract

This paper surveys the literature since 1993 on pseudo out-of-sample evaluation of inflation forecasts in the United States and conducts an extensive empirical analysis that recapitulates and clarifies this literature using a consistent data set and methodology. The literature review and empirical results are gloomy and indicate that Phillips curve forecasts (broadly interpreted as forecasts using an activity variable) are better than other multivariate forecasts, but their performance is episodic, sometimes better than and sometimes worse than a good (not nave) univariate benchmark. The authors provide some preliminary evidence characterizing successful forecasting episodes.

Suggested Citation

  • James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbcp:y:2008:n:53:x:2
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; Inflation (Finance); Phillips curve;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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