A state-dependent model for inflation forecasting
We develop a parsimonious bivariate model of inflation and unemployment that allows for persistent variation in trend inflation and the NAIRU. The model, which consists of five unobserved components (including the trends) with stochastic volatility, implies a time-varying VAR for changes in the rates of inflation and unemployment. The implied backwards-looking Phillips curve has a time-varying slope that is steeper in the 1970s than in the 1990s. Pseudo out-of-sample forecasting experiments indicate improvements upon univariate benchmarks. Since 2008, the implied Phillips curve has become steeper and the NAIRU has increased.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/ifdp/order.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gambetti, Luca & D’Agostino, Antonello & Giannone, Domenico, 2010.
"Macroeconomic forecasting and structural change,"
Working Paper Series
1167, European Central Bank.
- D'Agostino, Antonello & Gambetti, Luca & Giannone, Domenico & Giannone, Domenico, 2009. "Macroeconomic Forecasting and Structural Change," Research Technical Papers 8/RT/09, Central Bank of Ireland.
- D'Agostino, Antonello & Gambetti, Luca & Giannone, Domenico, 2009. "Macroeconomic Forecasting and Structural Change," CEPR Discussion Papers 7542, C.E.P.R. Discussion Papers.
- Antonello D'Agostino & Luca Gambetti & Domenico Giannone, 2009. "Macroeconomic Forecasting and Structural Change," Working Papers ECARES 2009_020, ULB -- Universite Libre de Bruxelles.
- Laurence Ball & Sandeep Mazumder, 2011.
"Inflation Dynamics and the Great Recession,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 337-405.
- Laurence Ball & Sandeep Mazumder, 2011. "Inflation Dynamics and the Great Recession," Economics Working Paper Archive 580, The Johns Hopkins University,Department of Economics.
- Sandeep Mazumder & Laurence M. Ball, 2011. "Inflation Dynamics and the Great Recession," IMF Working Papers 11/121, International Monetary Fund.
- Laurence M. Ball & Sandeep Mazumder, 2011. "Inflation Dynamics and the Great Recession," NBER Working Papers 17044, National Bureau of Economic Research, Inc.
- Dotsey, Michael & Fujita, Shigeru & Stark, Tom, 2011. "Do Phillips curves conditionally help to forecast inflation?," Working Papers 11-40, Federal Reserve Bank of Philadelphia.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:1062. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)
If references are entirely missing, you can add them using this form.