Measuring the Slowly Evolving Trend in US Inflation with Professional Forecasts

James Nason and Gregor Smith

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Much research studies US inflation history with a trend-cycle model with unobserved components. A key feature of this model is that the trend may be viewed as the Fed’s evolving inflation target or long-horizon expected inflation. We provide a new way to measure the slowly evolving trend and the cycle (or inflation gap), based on forecasts from the Survey of Professional Forecasters. These forecasts may be treated either as rational expectations or as adjusting to those with sticky information. We find considerable evidence of inflation-gap persistence and some evidence of implicit sticky information. But statistical tests show we cannot reconcile these two widely used perspectives on US inflation and professional forecasts, the unobserved-components model and the sticky-information model.

Keywords: US inflation; professional forecasts; sticky information; Beveridge-Nelson (search for similar items in EconPapers)
JEL-codes: E31 E37 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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https://cama.crawford.anu.edu.au/sites/default/fil ... 2014_nason_smith.pdf (application/pdf)

Related works:
Journal Article: Measuring the slowly evolving trend in US inflation with professional forecasts (2021)
Working Paper: Measuring The Slowly Evolving Trend In Us Inflation With Professional Forecasts (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-07

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