IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Evaluating inflation forecasts

  • Dean Croushore

In the early 1980s, economists tested inflation forecasts and found that the forecasts were very bad. Either the surveys didn't capture forecasters' expectations, or forecasters didn't have rational expectations. However, the sample period being examined consisted mostly of data from the volatile 1970s, when forecasting was extremely difficult. The question is: If we run the same types of tests that were performed 15 years ago on an updated sample, will we find the same problems with the forecasts? This paper finds that much of the empirical work from 15 years ago does not stand the test of time. The forecast errors from the surveys aren't nearly as bad today as they were in the 1970s. However, some problems remain in the forecasts. It appears to be possible to improve inflation forecasts over some sample periods using bias regressions, and the forecasts don't pass all tests for optimality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/1998/wp98-14.pdf
Download Restriction: no

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 98-14.

as
in new window

Length:
Date of creation: 1998
Date of revision:
Handle: RePEc:fip:fedpwp:98-14
Contact details of provider: Postal: 10 Independence Mall, Philadelphia, PA 19106-1574
Web page: http://www.philadelphiafed.org/

More information through EDIRC

Order Information: Web: http://www.phil.frb.org/econ/wps/index.html Email:


References listed on IDEAS
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.:

as in new window
  1. Pearce, Douglas K, 1979. "Comparing Survey and Rational Measures of Expected Inflation: Forecast Performance and Interest Rate Effects," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 447-56, November.
  2. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  3. Herb Taylor, 1992. "The Livingston Surveys: a history of hopes and fears," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-27.
  4. Roy H. Webb, 1987. "The irrelevance of tests for bias in series of macroeconomic forecasts," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 3-9.
  5. Bryan, Michael F & Gavin, William T, 1986. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 539-44, November.
  6. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  7. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
  8. Dean Croushore, 1997. "The Livingston Survey: still useful after all these years," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 15-27.
  9. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
  10. Michael F. Bryan & Stephen G. Cecchetti, 1993. "Measuring Core Inflation," NBER Working Papers 4303, National Bureau of Economic Research, Inc.
  11. Francis X. Diebold & Jose A. Lopez, 1996. "Forecast Evaluation and Combination," NBER Technical Working Papers 0192, National Bureau of Economic Research, Inc.
  12. John A. Carlson, 1977. "A Study of Price Forecasts," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 6, number 1, pages 27-56 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:98-14. 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: (Beth Paul)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.