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Forecasting implications of the recent decline in inflation

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  • Todd E. Clark
  • Saeed Zaman

Abstract

Should the unanticipated slowing of inflation that has occurred since early 2012 raise doubts about the reliability of inflation forecasts? We answer this question by conducting a few exercises with a common macroeconomic forecasting model. Our results indicate that even though inflation turned out to be much lower than forecasted, it still fell well within a normal range of uncertainty, and most of the deviation from the original forecast was a response to other economic developments.

Suggested Citation

  • Todd E. Clark & Saeed Zaman, 2013. "Forecasting implications of the recent decline in inflation," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
    • Handle: RePEc:fip:fedcec:y:2013:i:nov15:n:2013-15
    DOI: 10.26509/frbc-ec-201315
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    References listed on IDEAS

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    1. Clark, Todd E., 2011. "Real-Time Density Forecasts From Bayesian Vector Autoregressions With Stochastic Volatility," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(3), pages 327-341.
    2. Kozicki, Sharon & Tinsley, P. A., 2001. "Term structure views of monetary policy under alternative models of agent expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 149-184, January.
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    Cited by:

    1. Randal Verbrugge & Saeed Zaman, 2024. "Post‐COVID inflation dynamics: Higher for longer," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(4), pages 871-893, July.
    2. Edward S. Knotek & Saeed Zaman, 2014. "The Slowdown in Residential Investment and Future Prospects," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.

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