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| Anindya Biswas |
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| ''The output gap and inflation in U.S. data: an empirical note'' |
| ( 2015, Vol. 35 No.2 ) |
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| This paper analyzes the relationship between the output gap and inflation. This study uses a newly proposed flexible data-driven measure of the output gap and finds that such a distance weight-based measure of the ex-ante output gap (WAgap), has a significant and better in-sample relation with inflation in U.S from January, 1948 to August, 2013 compared to a prevalent ex-ante trend-based measure of the output gap. However, this study confirms the literature's conclusion that finding the out-of-sample/real-time predictability for inflation is most challenging, and the WAgap model provides only modest improvement over the benchmark historical mean model. |
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| Keywords: Inflation predictability, Output gap, Real-time data, Beta-weighting scheme |
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General |
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| Manuscript Received : May 17 2014 | | Manuscript Accepted : Apr 02 2015 |
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