Tuesday, November 21, 2017

Dynamic information equilibrium: UK CPI

The dynamic information equilibrium CPI model doesn't just apply to the US. Here is the UK version (data is yellow, model is blue):


The forecast is for inflation to run at about 2.1% (close to the US dynamic equilibrium of 2.5%) in the absence of shocks:



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Also, try to avoid the use of dollar signs as they interfere with my setup of mathjax. I left it set up that way because I think this is funny for an economics blog. You can use € or £ instead.