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Report
Real-time inflation forecasting in a changing world
This paper revisits the accuracy of inflation forecasting using activity and expectations variables. We apply Bayesian-model averaging across different regression specifications selected from a set of potential predictors that includes lagged values of inflation, a host of real activity data, term structure data, nominal data, and surveys. In this model average, we can entertain different channels of structural instability by incorporating stochastic breaks in the regression parameters of each individual specification within this average, allowing for breaks in the error variance of the ...
Working Paper
Relative prices and pure inflation since the mid-1990s
This paper decomposes consumer price inflation into pure inflation, relative price inflation, and idiosyncratic inflation by estimating a dynamic factor model รก la Reis and Watson (2010) on a data set of 146 monthly disaggregated prices from 1995 to 2019. We find that pure inflation is the trend around which PCE price inflation fluctuates, while relative price inflation and idiosyncratic inflation drive the fluctuation of PCE price inflation around the trend. Unlike Reis and Watson, we find that labor market slack is the main driver of pure inflation and that energy prices account for ...