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Inflation Volatility and Forecast Accuracy

Author

Listed:
  • Jamie Hall

    (Reserve Bank of Australia)

  • Jarkko Jääskelä

    (Reserve Bank of Australia)

Abstract
This paper examines the statistical properties of inflation in a sample of inflation-targeting and non-inflation-targeting countries. First, it analyses the time-varying volatility of a measure of the persistent component of inflation. Based on this measure, inflation-targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom) have experienced a relatively more pronounced fall in the volatility of inflation than non-inflation-targeting countries (Austria, France, Germany, Japan and the United States). But it is hard to say whether inflation is more volatile in inflation-targeting or non-inflation-targeting countries. Second, it analyses whether inflation became easier to forecast after the introduction of inflation targeting. It finds that inflation became easier to forecast in both inflation-targeting and non-inflation-targeting countries; the improvement was greater for the former group but forecast errors remain smaller for the latter group.

Suggested Citation

  • Jamie Hall & Jarkko Jääskelä, 2009. "Inflation Volatility and Forecast Accuracy," RBA Research Discussion Papers rdp2009-06, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2009-06
    as

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    File URL: https://www.rba.gov.au/publications/rdp/2009/pdf/rdp2009-06.pdf
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    References listed on IDEAS

    as
    1. James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
    2. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2002. "Does it pay to be transparent? international evidence form central bank forecasts," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 99-118.
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    9. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
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    Citations

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    Cited by:

    1. Ivan Kitov & Oleg Kitov, 2013. "Does Banque de France control inflation and unemployment?," Papers 1311.1097, arXiv.org.
    2. Bruno Ferreira Frascaroli & Wellington Charles Lacerda Nobrega, 2019. "Inflation Targeting and Inflation Risk in Latin America," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2389-2408, September.
    3. Koirala, Niraj P. & Nyiwul, Linus, 2023. "Inflation volatility: A Bayesian approach," Research in Economics, Elsevier, vol. 77(1), pages 185-201.
    4. Ivan Kitov & Oleg Kitov, 2011. "The Australian Phillips curve and more," Papers 1102.1851, arXiv.org.

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    More about this item

    Keywords

    inflation; time series econometrics;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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