The macroeconomic and fiscal implications of inflation forecast errors

Dellas, Harris; Gibson, Heather D.; Hall, Stephen G.; Tavlas, George S. (2018). The macroeconomic and fiscal implications of inflation forecast errors. Journal of economic dynamics & control, 93, pp. 203-217. Elsevier 10.1016/j.jedc.2018.01.030

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The accuracy of inflation forecasts has important implications for macroeconomic stability and real interest rates in economies with nominal rigidities. Erroneous forecasts destabilize output, undermine the conduct of monetary policy under inflation targeting and affect the cost of both short and long-term government borrowing. We propose a new method for forecasting inflation that combines individual forecasts using time-varying-coefficient estimation along with an alternative method based on neural nets. Its application to forecast data from the US and the euro area produces superior performance relative to the standard practice of using individual or linear combinations of individual forecasts, especially during periods marked by structural changes.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Dellas, Harris

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0165-1889

Publisher:

Elsevier

Language:

English

Submitter:

Dino Collalti

Date Deposited:

24 Jun 2019 17:38

Last Modified:

12 Nov 2019 15:49

Publisher DOI:

10.1016/j.jedc.2018.01.030

BORIS DOI:

10.7892/boris.127512

URI:

https://boris.unibe.ch/id/eprint/127512

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