This paper investigates whether using natural logarithms (logs) of price indices for forecasting inflation rates is preferable to employing the original series. Univariate forecasts for annual inflation rates for a number of European countries and the USA based on monthly seasonal consumer price indices are considered. Stochastic seasonality and deterministic seasonality models are used. In man...

Inflation depends generically on current and expected monetary and fiscal policies. There are three ways to carry $1 today into the future: money, bonds, and real assets. That dollar’s purchasing power varies inversely with the price level. The real return on money depends on the flow of transactions services it supports and the expected inflation rate; the analogous return on bonds is the nomi...

Let me begin by stating categorically that, whatever else I may say today, I am for Price Stability. I'm also for Motherhood and apple pie. Of course, what I mean by that is that everyone is for price stability, but they often mean somewhat different things by it. How low an inflation rate should constitute price stability? Is zero the right number? Should we target the general level of prices,...

This paper uses the European Commission’s Consumer Survey to assess whether inflation expectations have converged and whether inflation uncertainty has diminished following the introduction of the Euro in Europe. Consumers’ responses to the survey suggest that inflation expectations depend more on past national inflation rates than on the ECB’s anchor for price stability. The convergence in inf...

The seminal work of Phelps, Taylor, and Cairo developed forwardlooking models of price determination that imparted inertia to the price leveh These models incorporate expectations of future prices and excess demand by imposing constraints (typically lag-lead symmetry constrainls) that force future variables to enter the specification. In this paper, I test the empirical significance of future p...

The price of a barrel of crude oil doubled within a few months last year. Although prices have been easing lately, for those who paid more than $3 for a gallon of gas, the memory is not likely to fade quickly. But worries about higher gas prices don’t end at the pump. Oil price shocks—sudden and sharp increases in the price of oil and its derivatives like gasoline—are associated in the popular ...