Department of Economics and Business Economics

A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations

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A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations. / Lanne, Markku; Luoto, Jani.

In: Journal of Money, Credit and Banking, Vol. 49, No. 5, 08.2017, p. 969-995.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Lanne, M & Luoto, J 2017, 'A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations', Journal of Money, Credit and Banking, vol. 49, no. 5, pp. 969-995. https://doi.org/10.1111/jmcb.12402

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Author

Lanne, Markku ; Luoto, Jani. / A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations. In: Journal of Money, Credit and Banking. 2017 ; Vol. 49, No. 5. pp. 969-995.

Bibtex

@article{03831842625d4184a8ef3397985d2d5c,
title = "A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations",
abstract = "We study the evolution of U.S. inflation by means of a new noncausal autoregressive model with time-varying parameters that outperforms the corresponding causal and constant-parameter noncausal models in terms of fit and forecast accuracy. Our model also beats the unobserved component stochastic volatility (UCSV) model, one of the best-performing univariate inflation forecasting models, in terms of both point and density forecasts. We also show how the new Keynesian Phillips curve can be estimated based on our noncausal model. Both expected and lagged inflation turn out important, but the former dominates in determining the current inflation.",
keywords = "noncausal autoregression, new Keynesian Phillips curve, time-varying parameters, stochastic volatility, inflation forecasting, PREDICTIVE ABILITY, INTEREST-RATES, FINANCIAL DATA, FORECAST, VARIABLES, GREENBOOK, ACCURACY, PRICES, TESTS",
author = "Markku Lanne and Jani Luoto",
year = "2017",
month = aug,
doi = "10.1111/jmcb.12402",
language = "English",
volume = "49",
pages = "969--995",
journal = "Journal of Money, Credit and Banking",
issn = "0022-2879",
publisher = "Wiley",
number = "5",

}

RIS

TY - JOUR

T1 - A New Time-Varying Parameter Autoregressive Model for US Inflation Expectations

AU - Lanne, Markku

AU - Luoto, Jani

PY - 2017/8

Y1 - 2017/8

N2 - We study the evolution of U.S. inflation by means of a new noncausal autoregressive model with time-varying parameters that outperforms the corresponding causal and constant-parameter noncausal models in terms of fit and forecast accuracy. Our model also beats the unobserved component stochastic volatility (UCSV) model, one of the best-performing univariate inflation forecasting models, in terms of both point and density forecasts. We also show how the new Keynesian Phillips curve can be estimated based on our noncausal model. Both expected and lagged inflation turn out important, but the former dominates in determining the current inflation.

AB - We study the evolution of U.S. inflation by means of a new noncausal autoregressive model with time-varying parameters that outperforms the corresponding causal and constant-parameter noncausal models in terms of fit and forecast accuracy. Our model also beats the unobserved component stochastic volatility (UCSV) model, one of the best-performing univariate inflation forecasting models, in terms of both point and density forecasts. We also show how the new Keynesian Phillips curve can be estimated based on our noncausal model. Both expected and lagged inflation turn out important, but the former dominates in determining the current inflation.

KW - noncausal autoregression

KW - new Keynesian Phillips curve

KW - time-varying parameters

KW - stochastic volatility

KW - inflation forecasting

KW - PREDICTIVE ABILITY

KW - INTEREST-RATES

KW - FINANCIAL DATA

KW - FORECAST

KW - VARIABLES

KW - GREENBOOK

KW - ACCURACY

KW - PRICES

KW - TESTS

U2 - 10.1111/jmcb.12402

DO - 10.1111/jmcb.12402

M3 - Journal article

VL - 49

SP - 969

EP - 995

JO - Journal of Money, Credit and Banking

JF - Journal of Money, Credit and Banking

SN - 0022-2879

IS - 5

ER -