A Distant-Early-Warning Model of Inflation Based on M1 Disequilibria

J. Armour, Joseph Atta-Mensah (), W. Engert and Scott Hendry ()

Working Papers from Bank of Canada

Abstract: A vector error-correction Model (VECM) that Forecasts inflation between the current quarter and eight quarters ahead is found to privide significant leading information about inflation. The model focusses on th effects of deviations of M1 from its long-run demand but also includes, among other things, the influence of the exchange rate, a simple measure of the output gap and past prices.

Keywords: INFLATION; ECONOMIC MODELS; FORECASTS (search for similar items in EconPapers)
JEL-codes: C20 E31 E37 (search for similar items in EconPapers)
Date: 1996
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