Nowcasting U.S. Headline and Core Inflation
Edward Knotek () and
No 1403, Working Papers (Old Series) from Federal Reserve Bank of Cleveland
Forecasting future inflation and nowcasting contemporaneous inflation are difficult. We propose a new and parsimonious model for nowcasting headline and core inflation in the U.S. price index for personal consumption expenditures (PCE) and the consumer price index (CPI). The model relies on relatively few variables and is tested using real-time data. The model?s nowcasting accuracy improves as information accumulates over the course of a month or quarter, and it easily outperforms a variety of statistical benchmarks. In head-to-head comparisons, the model?s nowcasts of CPI infl ation outperform those from the Blue Chip consensus, with especially significant outperformance as the quarter goes on. The model?s nowcasts for CPI and PCE inflation also significantly outperform those from the Survey of Professional Forecasters, with similar nowcasting accuracy for core inflation measures. Across all four inflation measures, the model?s nowcasting accuracy is generally comparable to that of the Federal Reserve?s Greenbook.
Keywords: nowcasting; Greenbook.; forecasting; inflation; professional forecasters; real-time data (search for similar items in EconPapers)
JEL-codes: E37 C53 E3 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-05-01, Revised 2014-05-01
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
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Journal Article: Nowcasting U.S. Headline and Core Inflation (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1403
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