Model Specification and Inflation Forecast Uncertainty

Gunnar Bårdsen, Eilev Jansen and Ragnar Nymoen ()

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: Three classes of inflation models are discussed: Standard Phillips curves, New Keynesian Phillips curves and Incomplete Competition models. Their relative merits in explaining and forecasting inflation are investigated theoretically and empirically. We establish that Standard Phillips-curve forecasts are robust to types of structural breaks that harm the Incomplete Competion model forecasts, but exaggerate forecast uncertainty in periods with no breaks. As the potential biases in after-break forecast errors for the Incomplete Competition model can be remedied by intercept corrections, it offers the best prospect of successful inflation forecasting.

Keywords: monetary policy; inflation targeting; wages and prices; model specification; encompassing; model uncertainty; forecasting (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 C53 E31 E52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2000-04-28, Revised 2002-01-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Model Specification and Inflation Forecast Uncertainty (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:nst:samfok:1302

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