Inflation Forecasts in Asia and the Pacific: Performance, Disagreement and Spillovers
26 Pages Posted: 6 Oct 2014
Date Written: March 2014
Until the global financial crisis of 2008–09, central banks celebrated the achievement of lower and more stable inflation rates. With a few exceptions, this accomplishment was a global one. Motivated by concerns over whether the relentless easing of policy in economies most stricken by the US and euro zone financial crises may lead to higher future inflation, this paper examines inflation forecast performance along several dimensions. The focus is on 12 economies in Asia and the Pacific as well as inflation performance in the United States and the euro zone. The principal findings of the paper are as follows. Whether forecasts portend an unanchoring of expectations depends crucially on whether central banks convince the optimists or the pessimists amongst forecasters. Second, crisis times are precisely when central banks have the greatest flexibility to exploit deviations from some inflation objective. Third, forecasters can express a large degree of disagreement with central banks over one-year inflation forecasts especially during stressful economic times. The notion that forecasters essentially adopt or mimic central bank forecasts does not hold at all times, and especially not during stressful economic times.
Full publication: Globalisation, Inflation and Monetary Policy in Asia and the Pacific
Keywords: inflation forecast performance, persistence, disagreement, spillovers
JEL Classification: E52, E58, C53
Suggested Citation: Suggested Citation