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Predicting Turning Points in the UK Inflation Cycle

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  • Artis, Michael J

Abstract

We set out a reference chronology for annual UK inflation, identifying nine complete cycles between 1958 and 1990. Inflation over this period is asymmetric, falling more quickly than it rises. Leading indicators are also proposed, with composite shorter and longer leading indicators constructed. These exhibit leads at peaks which are generally longer than at troughs. An evaluation of the composite series is also conducted to indicate how they might perform in real time. Overall, they give clear prior turning point information with relatively few `false signals'. Nevertheless, we find that inflation troughs are more difficult to predict than peaks.

Suggested Citation

  • Artis, Michael J, 1994. "Predicting Turning Points in the UK Inflation Cycle," CEPR Discussion Papers 880, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:880
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    References listed on IDEAS

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    Cited by:

    1. J. M. Binner & R. K. Bissoondeeal & A. W. Mullineux, 2005. "A composite leading indicator of the inflation cycle for the Euro area," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1257-1266.
    2. Simon Hayes, 2001. "Leading indicator information in UK equity prices: an assessment of economic tracking portfolios," Bank of England working papers 137, Bank of England.
    3. Gibson, Heather D. & Lazaretou, Sophia, 2001. "Leading inflation indicators for Greece," Economic Modelling, Elsevier, vol. 18(3), pages 325-348, August.
    4. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15.
    5. Ivanova, Detelina & Lahiri, Kajal & Seitz, Franz, 2000. "Interest rate spreads as predictors of German inflation and business cycles," International Journal of Forecasting, Elsevier, vol. 16(1), pages 39-58.
    6. Jiang, Chun & Chang, Tsangyao & Li, Xiao-Lin, 2015. "Money growth and inflation in China: New evidence from a wavelet analysis," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 249-261.
    7. Hugo Oliveros C., 1998. "Modelos De Duración:Una Aplicación En El Caso De La Inflacíón Y La Tasa De Interés," BORRADORES DE ECONOMIA 003241, BANCO DE LA REPÚBLICA.
    8. Tan, Hao & Mathews, John A., 2010. "Identification and analysis of industry cycles," Journal of Business Research, Elsevier, vol. 63(5), pages 454-462, May.

    More about this item

    Keywords

    Bayesian; Cycles; Forecasting; Inflation; Leading Indicators;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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