Models using service inflation better at predicting economic trends, Cleveland Fed paper finds
Tying unemployment rate with inflation in services can improve economic forecasting
Economic forecasting accuracy improves notably when based on models that exploit relationships between services inflation and the unemployment rate, according to a Federal Reserve Bank of Cleveland research paper.
Forecasting Inflation: Phillips Curve Effects on Services Price Measures, by Ellis Tallman and Saeed Zaman, estimates an empirical model of inflation that exploits a Phillips curve relationship between a measure of unemployment and a sub-aggregate measure of inflation.
Tallman and
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