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Professionals’ Forecast of the Inflation Gap and its Persistence

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Abstract

The purpose of the present paper is to investigate perceived inflation gap persistence using actual data of professional forecasts. We derive the unobserved perceived inflation gap persistence and using a state dependent model we estimate the non-linear persistence coefficient of inflation gap. Our main result is that for GDP deflator inflation, the estimates of persistence largely confirm the results obtained indirectly using a linear model. However, when we look at CPI inflation, we find that there is strong evidence for state-dependence and time variation.

Suggested Citation

  • Easaw, Joshy & Heravi, Saeed & Dixon, Huw David, 2015. "Professionals’ Forecast of the Inflation Gap and its Persistence," Cardiff Economics Working Papers E2015/13, Cardiff University, Cardiff Business School, Economics Section.
  • Handle: RePEc:cdf:wpaper:2015/13
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    1. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
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    Keywords

    Perceived Inflation Gaps; Professional’s Survey-based Forecasts; State-Dependent Models;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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