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Nowcasting U.S. Headline and Core Inflation
Author(s) -
KNOTEK EDWARD S.,
ZAMAN SAEED
Publication year - 2017
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12401
Subject(s) - nowcasting , headline , inflation (cosmology) , consumer price index (south africa) , index (typography) , economics , core inflation , econometrics , personal consumption expenditures price index , monetary policy , computer science , inflation targeting , monetary economics , consumer confidence index , macroeconomics , advertising , business , geography , physics , theoretical physics , meteorology , world wide web
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. consumer price index and price index for personal consumption expenditures that relies on relatively few variables. The model's nowcasting accuracy improves as information accumulates over a month or quarter, outperforming statistical benchmarks. In real‐time comparisons, the model's headline inflation nowcasts substantially outperform those from the Blue Chip consensus and the Survey of Professional Forecasters. Across all four inflation measures, the model's nowcasting accuracy is comparable to that of the Federal Reserve Board's Greenbook.