Cleveland paper trumpets value of median CPI in forecasting
Using "trimmed" inflation statistics improves the accuracy of forecasts for headline and core inflation, real GDP growth and the unemployment rate, according to a working paper published by the Federal Reserve Bank of Cleveland yesterday.
The paper – It's Not Just for Inflation: The Usefulness of the Median CPI in BVAR Forecasting, by Brent Meyer and Saeed Zaman – introduces median CPI into a range of multivariate models used in policy analysis at the Fed.
The authors say the improvements in
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