Building a regional forecasting model utilizing long-term relationships and short-term indicators

Economic indicators ; Forecasting ; Regional economics

Mean reversion of inflation rates in 19 OECD countries: Evidence from panel Lm unit root tests with structural breaks

The paper applies the recently developed panel LM unit root tests with heterogeneous structural breaks by Im et al., [The Oxford Bulletin of Economics and Statistics, 2005] in order to re-examine the validity of mean reversion in the inflation rates of 19 OECD countries for the time period 1960-2004. Our empirical findings are favorable to the stationarity of the inflation ratesand therefore point to the absence of hyperinflation in the majority of the countries. The results indicate that most shocks to inflation rates are temporary and soon converge when we control for breaks, with the inflation rates showing mean reversion. Overall, some policy implications are obtained in this paper.Inflation

Do wages help predict inflation?

In the financial press, productivity-related wages are often cited as an inflation indicator. For example, recently slow rates of wage growth have been noted as a factor that will keep inflation rates low in the future. While inflation and wage growth do appear to be highly correlated over longer time periods, it is not clear whether movements in wage growth precede movements in inflation, thereby providing predictive content for future inflation. In this article, Kenneth Emery and Chih-Ping Chang examine the usefulness of wage growth as a predictor of inflation, as well as carry out a stability analysis of the relationship underlying inflation and wages. The results caution against using wage growth as a signal of future inflation in that wage growth has no information content for future inflation. Furthermore, the bivariate relationship between inflation and wage growth is shown to be unstable.Inflation (Finance) ; Wages

Credit and economic activity: shocks or propagation mechanism?

Credit