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Forecasting inflation using interest rate and time-series models: some international evidence

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  • Rik Hafer
  • Scott E. Hein

Abstract

It has been suggested that inflation forecasts derived from short-term interest rates are as accurate as time-series forecasts. Previous analyses of this notion have focused on U.S. data, providing mixed results. In this article, the authors extend previous work by testing the hypothesis using data taken from the United States and five other countries. Using monthly Eurocurrency rates and the consumer price index for the period 1967-86, their results indicate that time-series forecasts of inflation have equal or lower forecast errors and have unbiased predictions more often than the interest-rate-based forecasts. Copyright 1990 by the University of Chicago.
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Suggested Citation

  • Rik Hafer & Scott E. Hein, 1988. "Forecasting inflation using interest rate and time-series models: some international evidence," Working Papers 1988-001, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:1988-001
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    References listed on IDEAS

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    1. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
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    Cited by:

    1. Mester Ioana Teodora, 2009. "VEC MODEL OF DEVELOPING COUNTRY INFLATIONARY DYNAMICS a€“ AN EMPIRICAL STUDY a€“ THE CASE OF ROMANIA," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 677-682, May.
    2. Param Silvapulle & Ramya Hewarathna, 2002. "Robust estimation and inflation forecasting," Applied Economics, Taylor & Francis Journals, vol. 34(18), pages 2277-2282.

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    Keywords

    Inflation (Finance); Forecasting;

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