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This paper simulates out-of-sample inflation forecasting for Germany, the UK, and the US. In contrast to other studies, we use output gaps estimated with unrevised real-time GDP data. This exercise assumes an information set similar to that available to a policymaker at a given point in time since GDP data is subject to sometimes substantial revisions. In addition to using real-time datasets for the UK and the US, we employ a dataset for real-time German GDP data not used before. We find that Phillips curves based on ex post output gaps generally improve the accuracy of inflation forecasts compared to an AR(1) forecast but that real-time output gaps often do not help forecasting inflation. This raises the question how operationally useful certain output gap estimates are for forecasting inflation.

Inflation (Finance) --- Phillips curve. --- Forecasting --- Econometric models. --- Unemployment --- Finance --- Natural rate of unemployment --- Mathematical models --- Effect of inflation on --- Econometrics --- Inflation --- Production and Operations Management --- Macroeconomics: Production --- Forecasting and Other Model Applications --- Price Level --- Deflation --- Estimation --- Macroeconomics --- Economic Forecasting --- Econometrics & economic statistics --- Output gap --- Potential output --- Economic forecasting --- Estimation techniques --- Production --- Economic theory --- Prices --- Econometric models --- United States

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In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector two-good new-Keynesian model to study the optimal choice of price index in markets with financial frictions. We find that, in the presence of financial frictions, a welfare-maximizing central bank should adopt flexible headline inflation targeting a target for headline CPI inflation with some weight on the output gap. These results are particularly relevant for emerging markets, where the share of food expenditures in total consumption expenditures is high and a large proportion of consumers are credit constrained.

Inflation (Finance) --- Price indexes. --- Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Price indices --- Index numbers (Economics) --- Finance --- Natural rate of unemployment --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Price Level --- Deflation --- Monetary Policy --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Macroeconomics: Consumption --- Saving --- Wealth --- Monetary economics --- Inflation targeting --- Consumption --- Sticky prices --- Price indexes --- Monetary policy --- Prices --- National accounts --- Economics --- Canada

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This paper attempts to explain short- and long-term dynamics of-and forecast-inflation in Tajikistan using the Vector Error Correction Model (VECM) and Autoregressive Moving Average Model (ARMA). By analyzing different transmission channels through the VECM, we were able to evaluate their relative dominance, magnitude, and speed of transition to the equilibrium price level, with the view of identifying those policy tools that will enhance the effectiveness of monetary policy. We found that excess supply of broad money is inflationary in both the short and long term. The dynamic analysis also demonstrates that the exchange rate and international inflation have a strong impact on local prices. Available monetary instruments, such as the refinancing rate, have proven to be ineffective. Therefore, the Tajik monetary authority could greatly benefit from enhancing its monetary instruments toolkit, including by developing the interest rate channel, to improve its monetary policy execution and to achieve stable inflationary conditions.

Inflation (Finance) --- Monetary policy --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Finance --- Natural rate of unemployment --- Econometrics --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Forecasting --- Price Level --- Deflation --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Forecasting and Other Model Applications --- Multiple or Simultaneous Equation Models --- Multiple Variables: General --- Macroeconomics --- Monetary economics --- Currency --- Foreign exchange --- Economic Forecasting --- Econometrics & economic statistics --- Monetary base --- Exchange rates --- Economic forecasting --- Vector error correction models --- Prices --- Econometric models --- Tajikistan, Republic of

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A model in which monetary policy pursues full-fledged inflation targeting adapts well to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability tradeoff improves, and optimal policy responses to shocks moderate.

Anti-inflationary policies --- Inflation (Finance) --- Finance --- Natural rate of unemployment --- Antiinflationary policies --- Economic policy --- Price regulation --- Government policy --- Banks and Banking --- Inflation --- Money and Monetary Policy --- Economic Theory --- Production and Operations Management --- Price Level --- Deflation --- Monetary Policy --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Macroeconomics --- Monetary economics --- Economic theory & philosophy --- Banking --- Inflation targeting --- Supply shocks --- Central bank policy rate --- Output gap --- Monetary policy --- Supply and demand --- Interest rates --- Production --- Economic theory --- Ghana

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The paper constructs a new output gap measure for Vietnam by applying Bayesian methods to a two-equation AS-AD model, while treating the output gap as an unobservable series to be estimated together with other parameters. Model coefficients are easily interpretable, and the output gap series is consistent with a broader analysis of economic developments. Output gaps obtained from the HP detrending are subject to larger revisions than series obtained from a suitably adjusted model, and may be misleading compared to the model-based measure.

Industrial productivity --- Inflation (Finance) --- Statistical methods. --- Finance --- Natural rate of unemployment --- Productivity, Industrial --- TFP (Total factor productivity) --- Total factor productivity --- Industrial efficiency --- Production (Economic theory) --- Banks and Banking --- Foreign Exchange --- Inflation --- Production and Operations Management --- Business Fluctuations --- Cycles --- Price Level --- Deflation --- Model Construction and Estimation --- Macroeconomics: Production --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics --- Currency --- Foreign exchange --- Output gap --- Potential output --- Real interest rates --- Real exchange rates --- Production --- Prices --- Financial services --- Economic theory --- Interest rates --- Vietnam