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Predicting Turning Points in the UK Inflation Cycle

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  • Artis, M J, et al

Abstract

Inflation targeting is an important component of current U.K. economic policy and this paper examines the forecasting of inflation turning points using leading indicators. The authors identify nine complete inflation cycles between 1958 and 1993. Leading indicators are proposed, with composite shorter and longer leading indicators constructed on the basis of data to June 1992. Overall, the composite indicators give clear prior turning point information with relatively few 'false signals.' They exhibit leads at peaks which are generally longer than at troughs; correspondingly, the authors find that inflation troughs are generally more difficult to predict than peaks. Coauthors are R. C. Bladen-Hovell, Denise R. Osborn, Graham Smith, and W. Zhang. Copyright 1995 by Royal Economic Society.

Suggested Citation

  • Artis, M J, et al, 1995. "Predicting Turning Points in the UK Inflation Cycle," Economic Journal, Royal Economic Society, vol. 105(432), pages 1145-1164, September.
    • Handle: RePEc:ecj:econjl:v:105:y:1995:i:432:p:1145-64
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    Cited by:

    1. J. M. Binner & R. K. Bissoondeeal & A. W. Mullineux, 2005. "A composite leading indicator of the inflation cycle for the Euro area," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1257-1266.
    2. Quinn, Terry & Mawdsley, Andrew, 1996. "Forecasting Irish Inflation: A Composite Leading Indicator," Research Technical Papers 4/RT/96, Central Bank of Ireland.
    3. Simon Hayes, 2001. "Leading indicator information in UK equity prices: an assessment of economic tracking portfolios," Bank of England working papers 137, Bank of England.
    4. Gibson, Heather D. & Lazaretou, Sophia, 2001. "Leading inflation indicators for Greece," Economic Modelling, Elsevier, vol. 18(3), pages 325-348, August.
    5. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15.
    6. Ivanova, Detelina & Lahiri, Kajal & Seitz, Franz, 2000. "Interest rate spreads as predictors of German inflation and business cycles," International Journal of Forecasting, Elsevier, vol. 16(1), pages 39-58.
    7. de Bondt, Gabe J. & Hahn, Elke & Zekaite, Zivile, 2021. "ALICE: Composite leading indicators for euro area inflation cycles," International Journal of Forecasting, Elsevier, vol. 37(2), pages 687-707.
    8. Baher Ahmed Elgahry, 2020. "Regional and Interregional Business Cycle Comovement in Europe, Asia, and North America," Economics Bulletin, AccessEcon, vol. 40(4), pages 3088-3103.
    9. Jiang, Chun & Chang, Tsangyao & Li, Xiao-Lin, 2015. "Money growth and inflation in China: New evidence from a wavelet analysis," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 249-261.
    10. Hugo Oliveros C., 1998. "Modelos De Duración:Una Aplicación En El Caso De La Inflacíón Y La Tasa De Interés," Borradores de Economia 3241, Banco de la Republica.
    11. Tan, Hao & Mathews, John A., 2010. "Identification and analysis of industry cycles," Journal of Business Research, Elsevier, vol. 63(5), pages 454-462, May.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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