Fed in Print will be down for scheduled maintenance on Wednesday, November 19th, 2025. Please contact us at fip@stls.frb.org if you have any questions.

Fed in Print
All Title Author Abstract
Bank Series Content Type Author JEL Classification

Working Paper

Forecasts of inflation for VAR models


Abstract: Why are forecasts of inflation from VAR models so much worse then their forecasts of real variables? This paper documents that relatively poor performance, and finds that the price equation of a VAR model fitted to U.S. postwar data is poorly specified. Statistical work by other authors has found that coefficients in such price equations may not be constant. Based on specific monetary actions, two changes in monetary policy regimes are proposed. Accounting for those two shifts yields significantly more accurate forecasts and lessens the evidence of misspecification.

Access Documents

File(s): File format is text/html http://www.richmondfed.org/publications/research/working_papers/1994/wp_94-8.cfm

File(s): File format is application/pdf https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/working_papers/1994/pdf/wp94-8.pdf
Description: Full text

Authors

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Working Paper

Publication Date: 1994

Number: 94-08