Monday, January 30, 2017

An inflation forecast comparison update

I realized I hadn't updated the information equilibrium (IE) model comparison with the NY Fed DSGE model and the FOMC forecast since last August. Here is the most recent data (as of January 27th and 30th):


The IE model is still biased low [1], and the NY Fed DSGE model is biased high but we still can't really reject either model.

The FOMC was still very wrong back in March of 2014.

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Footnotes:

[1] One thing I noticed is that since the IE model actually starts at the beginning of 2014 it did not see the boost in employment (and therefore NGDP) that came in mid-2014. That might explain the biased low inflation (as NGDP is a model input).




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