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ALTERNATIVE P * MODELS OF INFLATION FORECASTS
Author(s) -
Lee Jim
Publication year - 1999
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1999.tb01432.x
Subject(s) - inflation (cosmology) , economics , econometrics , sample (material) , monetary policy , macroeconomics , physics , theoretical physics , thermodynamics
This paper reevaluates the inflation forecast performance of M2‐based P * models relative to other competing models over the period of 1970–96. Included in the comparative study are newly developed monetary aggregates, including M2+, MZM, and M2*, and direct treatments of velocity changes associated with recent developments in M2. Out‐of‐sample rolling‐horizon forecast exercises suggest that the predictive accuracy of alternative P * model specifications relative to traditional inflation models is not robust to different subsamples. The switching forecast performance between money‐based and output‐based models across periods highlights the extent of structural instability in the inflation generating process. ( JEL E3, E4, C2)