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Inflation forecasts: how good are they?

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  • Dean Croushore

Abstract

Forecasts of inflation affect decision-making in many segments of the economy. But in the early 1980s, economists found that forecasts in surveys taken over the past 20 years systematically underpredicted inflation. As a result, many economists stopped paying attention to forecasts. However, they may have abandoned them too quickly. In this article, Dean Croushore takes a closer look at survey forecasts and, after considering some relevant factors, concludes that inflation forecasts may not be as bad as you think

Suggested Citation

  • Dean Croushore, 1996. "Inflation forecasts: how good are they?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 15-25.
    • Handle: RePEc:fip:fedpbr:y:1996:i:may:p:15-25
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/1996/may-june/brmj96dc.pdf
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    Citations

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    Cited by:

    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
    2. Ball, Laurence & Croushore, Dean, 2003. "Expectations and the Effects of Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 473-484, August.
    3. Olivier Armantier & Wändi Bruine de Bruin & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2015. "Inflation Expectations And Behavior: Do Survey Respondents Act On Their Beliefs?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 505-536, May.
    4. Tom Stark, 1997. "Macroeconomic forecasts and microeconomic forecasters in the Survey of Professional Forecasters," Working Papers 97-10, Federal Reserve Bank of Philadelphia.
    5. Dean Croushore, 1997. "The Livingston Survey: still useful after all these years," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 15-27.
    6. Palle S. Andersen, 1997. "Forecast errors and financial developments," BIS Working Papers 51, Bank for International Settlements.
    7. Austin Murphy & Anandi Sahu, 2001. "Empirical evidence of a positive inflation premium being incorporated into stock prices," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(2), pages 177-185, June.
    8. Lloyd B. Thomas, 1999. "Survey Measures of Expected U.S. Inflation," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 125-144, Fall.
    9. Silverio Foresi & Alessandro Penati & George Pennacchi, 1997. "Estimating the cost of U.S. indexed bonds," Working Papers (Old Series) 9701, Federal Reserve Bank of Cleveland.
    10. Berlemann, Michael, 2001. "Forecasting inflation via electronic markets: Results from a prototype market," Dresden Discussion Paper Series in Economics 06/01, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    11. Berlemann, Michael, 2008. "Forecasting the ECB's main refinancing rate. A field experiment," Economics Letters, Elsevier, vol. 99(2), pages 379-383, May.
    12. Grant, Alan P. & Thomas, Lloyd B., 2001. "Supply shocks and the rationality of inflation forecasts," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(4), pages 515-532.
    13. Paul Bennett & In Sun Geoum & David S. Laster, 1997. "Rational bias in macroeconomic forecasts," Staff Reports 21, Federal Reserve Bank of New York.
    14. Dean Croushore, 1999. "How useful are forecasts of corporate profits?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-12.
    15. Dean Croushore, 1998. "Low inflation: the surprise of the 1990s," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-12.
    16. Michael Berlemann & Forrest Nelson, 2005. "Forecasting Inflation via Experimental Stock Markets Some Results from Pilot Markets," ifo Working Paper Series 10, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    More about this item

    Keywords

    Inflation (Finance); Forecasting;

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