Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Philadelphia
Working Papers
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.

Download Full text
Cite this item
Dean Croushore, Evaluating inflation forecasts, Federal Reserve Bank of Philadelphia, Working Papers 98-14, 1998.
More from this series
JEL Classification:
Subject headings:
Keywords: Forecasting ; Inflation (Finance)
For corrections, contact Beth Paul ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal