DP8292 A Century of Inflation Forecasts

Author(s): Antonello D'Agostino, Paolo Surico
Publication Date: March 2011
Keyword(s): monetary regimes, Phillips curve, predictability, time-varying models
JEL(s): E37, E42, E47
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8292

We investigate inflation predictability in the United States across the monetary regimes of the XXth century. The forecasts based on money growth and output growth were significantly more accurate than the forecasts based on past inflation only during the regimes associated with neither a clear nominal anchor nor a credible commitment to fight inflation. These include the years from the outbreak of World War II in 1939 to the implementation of the Bretton Woods Agreements in 1951, and from Nixon's closure of the gold window in 1971 to the end of Volcker?s disinflation in 1983.