Forecasting Inflation
Jon Faust and Jonathan H. Wright, Department of Economics, Johns Hopkins University, Baltimore MD 21218, USA, E-mail: faustj@jhu.edu, wrightj@jhu.edu
Abstract
This chapter discusses recent developments in inflation forecasting. We perform a horse-race among a large set of traditional and recently developed forecasting methods, and discuss a number of principles that emerge from this exercise. We find that judgmental survey forecasts outperform model-based ones, often by a wide margin. A very simple forecast that is just a glide path between the survey assessment of inflation in the current-quarter and the long-run survey forecast value turns out to be competitive with the actual survey forecast and thereby ...
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