P* Type Models: Evaluation and Forecasts

40 Pages Posted: 25 Apr 2011 Last revised: 24 Apr 2022

See all articles by R. A. Pecchenino

R. A. Pecchenino

Michigan State University

Robert Rasche

Michigan State University; National Bureau of Economic Research (NBER)

Date Written: August 1990

Abstract

This paper critically evaluates the Federal Reserve's p* model of inflation, and develops a model of national income determination implicit in the p* formulation. We use this model to forecast the future paths of key macroeconomic variables and investigate its behavior under a variety of deterministic monetary policy rules. These forecasts and policy simulations suggest a dynamic economic behavior inconsistent with stylized facts, and lead us to question the underlying structure of the p* formulation.

Suggested Citation

Pecchenino, R. A. and Rasche, Robert, P* Type Models: Evaluation and Forecasts (August 1990). NBER Working Paper No. w3406, Available at SSRN: https://ssrn.com/abstract=1820956

R. A. Pecchenino (Contact Author)

Michigan State University

Agriculture Hall
East Lansing, MI 48824-1122
United States

Robert Rasche

Michigan State University ( email )

East Lansing, MI 48824
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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