Inflationary Predictions Research Articles

Quantum Neural Networks for Forecasting Inflation Dynamics

Inflation is a key indicator in the economy that measures the average level of prices of goods and services, being an important ratio in public and private decision-making, so predicting it with precision has always been a concern of economists. This paper makes inflation predictions with different time horizons applying quantum theory through Quantum Neural Networks. The results obtained teach that Quantum Neural Networks overcome the predictive power of the existing models in the previous literature and yields a low-level of errors when predicting any change in the direction of the forecast trend.

Money/Asset Ratio as a Predictor of Inflation

This paper modifies a P-star model to forecast inflation using an argument that is in line with the concept of “price gap”. Liquid assets such as government bonds are also included to measure money demand for asset transaction. The out-of-sample forecast results show that, at least since the early 1990s, money supply/government debt ratio has been a useful predictor of U.S. inflation over one- to three-year horizons. The paper also argues that inflation dynamics in the U.S. since the early 1960s can be explained by two ratios: money supply and government debt as percentage of gross domestic product. Moreover, the relationship between inflation and government debt is negative as the latter positively affects the demand for money. Therefore, a low inflation today can be explained by a high government debt relative to money supply.

Inflation and professional forecast dynamics: An evaluation of stickiness, persistence, and volatility

This paper studies the joint dynamics of U.S. inflation and a term structure of average inflation predictions taken from the Survey of Professional Forecasters (SPF). We estimate these joint dynamics by combining an unobserved components (UC) model of inflation and a sticky‐information forecast mechanism. The UC model decomposes inflation into trend and gap components, and innovations to trend and gap inflation are affected by stochastic volatility. A novelty of our model is to allow for time‐variation in inflation‐gap persistence as well as in the frequency of forecast updating under sticky information. The model is estimated with sequential Monte Carlo methods that include a particle learning filter and a Rao–Blackwellized particle smoother. Based on data from 1968 Q4 to 2018 Q3, estimates show that (i) longer horizon average SPF inflation predictions inform estimates of trend inflation; (ii) inflation gap persistence is countercyclical before the Volcker disinflation and acyclical afterwards; (iii) by 1990 sticky‐information inflation forecast updating is less frequent than it was earlier in the sample; and (iv) the drop in the frequency of the sticky‐information forecast updating occurs at the same time persistent shocks become less important for explaining movements in inflation. Our findings support the view that stickiness in survey forecasts is not invariant to the inflation process.

Factors affecting inflation in Nigeria

This paper investigates factors (domestic and external) affecting inflation in Nigeria using the seasonal autoregressive integrated moving average with additional explanatory variables (SARIMA-X) due to the predictability of past series inflation and the embedded seasonal nature of inflation in Nigeria. The study estimated and evaluated three models for the variant of inflation (headline, food and core) and confirmed the interaction of the filtering effects of external and domestic factors affecting inflation in Nigeria. The paper noted that average fuel premium motor spirits (PMS) prices, total rainfall and any shocks to either food and core inflation or both has an instantaneous impact on the headline inflation with the external factor effect on fuel prices measured by bureau-de-change (BDC) Naira (N/$) exchange rate being significant.

Forecasting core inflation: the case of South Africa

ABSTRACT Underlying, or core, inflation is likely the most important variable for monetary policy. It is considered to be the optimal nominal anchor as it is stable, excludes relative price shocks, and reflects underlying trends in the behaviour of price-setters and demand conditions in the economy. Despite its importance, there is sparse literature on estimating and forecasting core inflation in South Africa, with the focus still on measuring it. This paper emphasizes predicting core inflation from time-varying parameter vector autoregressive models (TVP-VARs), factor-augmented VARs (FAVAR), and structural break models using quarterly data from 1981Q1 to 2013Q4. We use mean squared forecast errors (MSFE) and predictive likelihoods to evaluate the forecasts. In general, we find that (i) time-varying parameter models consistently outperform constant coefficient models (ii) small TVP-VARs outperform all other models; (iii) models with heteroscedastic errors do better than models with homoscedastic errors; and (iv) allowing for structural breaks does not improve the predictability of core inflation. Overall, our results imply that additional information on the growth rate of the economy and the interest rate is sufficient to forecast core inflation accurately, but the relationship between these three variables needs to be modelled in a time-varying fashion.

A time-varying expectations formation mechanism

We propose an expectations formation mechanism (EFM) aimed to explain the median—hence lay—forecaster’s year-ahead inflation predictions. The EFM is a time-varying combination of long-run expectations, current inflation and uncertainty with weights naively calibrated according to inflation dynamics. Earning fixed income, in fact, the median forecaster has an aversion toward underestimation that increases with inflation. To allow for occasional—albeit unintentional—cost-minimizing calibrations, the EFM nests various forecasting rules. Data from the Michigan Survey of Consumers sustains the argued behavior and contributes to interpret some puzzling price dynamics such as the missing disinflation and reflation.

Implementasi Support Vector Regression pada Prediksi Inflasi Indeks Harga Konsumen

Inflation reflects an increase in the prices of these items as well as those used by the Indonesian government, especially Bank Indonesia, in determining monetary policy. An indicator that can be obtained by Bank Indonesia in measuring inflation is the Consumer Price Index. This study discusses inflation prediction using the SVR method. Inflation test data issued by Bank Indonesia. As a comparison material for the kernel used in the SVR method using two kernels, namely Linear and Radial Base Function. The error rate evaluation results show that linear kernels produce better values, with a MAPE rate of 8.70% and MSE of 0.0037

Prices and Returns: What Is the Role of Inflation?

We document that the market dividend yield can positively predict future inflation across advanced economies after the fall of the Bretton Woods system. The inflation predictability reinforces the return predictability and reduces the dividend growth predictability. For example, dividend yields forecast nominal returns (but not nominal dividend growth), meanwhile, dividend yields forecast real dividend growth (but not real returns). The same results also hold for the earnings yields. We extend Campbell-Vuolteenaho's (2004) analysis to other industrialized countries whose stock markets are highly integrated, to deal with the processes and few independent observations issues. Hypothesis tests (related to future growth prospect, the discount rate, and behavior bias) suggest the high correlation between expected inflation and the dividend yield is almost entirely due to the correlation between expected inflation and the economy's future growth prospects. The results are robust across different future inflation measures including the long-term nominal government bond yields, and strongly support Fama's (1981) inflation acting as expected real activity proxy hypothesis. Therefore we argue the persistent inflation should be regarded as the state variable and be introduced as the second long-run risk (besides the consumption risk) into the long-run risk model. The estimated model can reproduce both the inflation predictability and the documented asset pricing facts.

Inflation Prediction Based on the “Long Memory” Effect: The Case of Russia

Inflation Prediction Based on the “Long Memory” Effect: The Case of Russia

Quartic inflation and radiative corrections with non-minimal coupling

It is well known that the non-minimal coupling ξ ϕ2 R between the inflaton and the Ricci scalar affects predictions of single field inflation models. In particular, the λ ϕ4 quartic inflation potential with ξ≳0.005 is one of the simplest models that agree with the current data. After reviewing the inflationary predictions of this potential, we analyze the effects of the radiative corrections due to couplings of the inflaton to other scalar fields or fermions. Using two different prescriptions discussed in the literature, we calculate the range of these coupling parameter values for which the spectral index ns and the tensor-to-scalar ratio r are in agreement with the data taken by the Keck Array/BICEP2 and Planck collaborations.

Holographic inflation

We apply the holographic principle at the early universe, obtaining an inflation realization of holographic origin. Such a consideration has equal footing with its well-studied late-time application, and moreover the decrease of the horizons at early times naturally increases holographic energy density at inflationary scales. Taking as Infrared cutoff the particle or future event horizons, and adding a simple correction due to the Ultraviolet cutoff, whose role is non-negligible at the high energy scales of inflation, we result in a holographic inflation scenario that is very efficient in incorporating inflationary requirements and predictions. We first extract analytically the solution of the Hubble function in an implicit form, which gives a scale factor evolution of the desired e-foldings. Furthermore, we analytically calculate the Hubble slow-roll parameters and then the inflation-related observables, such as the scalar spectral index and its running, the tensor-to-scalar ratio, and the tensor spectral index. Confronting the predictions with Planck 2018 observations we show that the agreement is perfect and in particular deep inside the 1σ region.

HOW DID UNCONVENTIONAL MONETARY POLICY AFFECT ECONOMIC FORECASTS?

We study how unconventional monetary policy announcements affected professional forecasters' predictions of bond rates, gross domestic product growth and inflation using data from the monthly survey by the Wall Street Journal. We find that unconventional monetary policy (UMP) announcements moved predicted bond rates in the direction the Fed intended. UMP announcements had differential impacts on forecasters' predictions; they also tended to move growth and inflation predictions in directions opposite those the Fed intended due to Fed information effects. A policy implication of our study is that the Fed should communicate economic projections to the public separately from monetary policy announcements to mitigate Fed information effects. (JEL E52, E58)

Warm inflation within a supersymmetric distributed mass model

We study the dynamics and observational predictions of warm inflation within a supersymmetric distributed mass model. This dissipative mechanism is well described by the interactions between the inflaton and a tower of chiral multiplets with a mass gap, such that different bosonic and fermionic fields become light as the inflaton scans the tower during inflation. We examine inflation for various mass distributions, analyzing in detail the dynamics and observational predictions. We show, in particular, that warm inflation can be consistently realized in this scenario for a broad parametric range and in excellent agreement with the Planck legacy data. Distributed mass models can be viewed as realizations of the landscape property of string theory, with the mass distributions coming from the underlying spectra of the theory, which themselves would be affected by the vacuum of the theory. We discuss the recently proposed swampland criteria for inflation models on the landscape and analyze the conditions under which they can be met within the distributed mass warm inflation scenario. We demonstrate mass distribution models with a range of consistency with the swampland criteria including cases in excellent consistency.

US real estate inflation prediction: Exchange rates and net foreign assets

The recent housing price inflation forecasting literature has focused on the use of domestic variables for prediction of housing price inflation. However, around 7% of all US housing sales are attributed to international buyers; a potentially important market force. Further, international finance theory finds a role for foreign savings shocks in causing the housing price bubble of the last decade. Under floating exchange rate regimes, the Dornbusch model predicts shocks to domestic or foreign economies will be reflected in exchange rates. When exchange rates are fixed, shocks are likely to affect the net foreign asset holdings. In this study, I examine the role of exchange rates returns and the net change in foreign asset holdings in improving US real estate inflation forecasts. I conduct in-sample and out-of-sample comparison of forecasting models relative to an autoregressive baseline model. I find that the inclusion of foreign sector variables can improve the US real estate inflation forecasts by up to 40%. This improvement is mostly driven by changes in the net foreign asset holdings at longer horizons. The results are robust to samples at the metropolitan level although with different gains.

Hillclimbing inflation in metric and Palatini formulations

A new setup of cosmic inflation with a periodic inflaton potential and conformal factor is discussed in the metric and Palatini formulations of gravity. As a concrete example, we focus on a natural-inflation-like inflaton potential, and show that the inflationary predictions fall into the allowed region of cosmic microwave background observations in both formulations.

Higgs inflation in the Palatini formulation with kinetic terms for the metric

We consider scalar field inflation in the Palatini formulation of general relativity. The covariant derivative of the metric is then non-zero. From the effective theory point of view it should couple to other fields. We write down the most general couplings between it and a scalar field that are quadratic in derivatives. We consider both the case when the torsion is determined by the field equations and the case when it is assumed to be zero a priori. We find the metric derivative terms can significantly modify inflationary predictions. We specialise to Higgs inflation and terms of only up to dimension 4. Transforming to the Einstein frame, we show that by tuning the coefficients of the new terms, we can generate various effective inflationary potentials, including quadratic, hilltop-type, $\alpha$-attractor and inflection point. Some of these can give inflation in agreement with observations, including with a large tensor-to-scalar ratio, even if the non-minimal coupling is zero.

Enhanced Evolutionary Sequential Minimal Optimization Model for Inflation Prediction

The control of inflation rate is at the core of monetary policy making. Therefore, there is very great interest in reliable inflation forecasts by central bankers to help them achieve this aim. The aim of this investigation has been to forecast inflation in case of the United States as accurately as possible. This paper proposes a new forecasting model called Sequential Minimal Organization (SMOreg-3passes) for regression predictions. SMOreg-3passes consists of four steps, they are technical indicators generation, feature selection, normalization regression and regression forecaster. The proposed model evaluated using two regression measurements (Mean Absolute Error (MAE) and Root Mean Square Error (RMSE)). Our evidence from the SMOreg-3passes model suggests that the chronology of time series has great influence on future forecasting and the error in forecasting the past has an exponential impact on the current data. The results showed that the proposed model outperformed the traditional SMO and Multiple Layer Perception (MLP) methods.

Palatini inflation in models with an R2 term

The Starobinsky model, considered in the framework of the Palatini formalism, in contrast to the metric formulation, does not provide us with a model for inflation, due to the absence of a propagating scalar degree of freedom that can play the role of the inflaton. In the present article we study the Palatini formulation of the Starobinsky model coupled, in general nonminimally, to scalar fields and analyze its inflationary behavior. We consider scalars, minimally or nonminimally coupled to the Starobinsky model, such as a quadratic model, the induced gravity model or the standard Higgs-like inflation model and analyze the corresponding modifications favorable to inflation. In addition we examine the case of a classically scale-invariant model driven by the Coleman-Weinberg mechanism. In the slow-roll approximation, we analyze the inflationary predictions of these models and compare them to the latest constraints from the Planck collaboration. In all cases, we find that the effect of the R2 term is to lower the value of the tensor-to-scalar ratio.

Galileon Intermediate Inflation

Abstract We investigate intermediate inflation in the framework of a Galileon scalar field. To this aim, we first obtain the inflationary observables, including the scalar spectral index, the tensor-to-scalar ratio, the running of the scalar spectral index, as well as the non-Gaussianity parameters. Then, we examine the observational viability of the intermediate inflation within the framework of a Galileon scenario. Our results show that although the prediction of intermediate inflation in the standard framework is completely ruled out by the Planck 2015 observations, it can be put inside the allowed regions of the Planck 2015 TT,TE,EE+lowP data in the Galileon setting. Moreover, we determine the parameter space of the Galileon intermediate inflation for which the model is consistent with the Planck 2015 data. Besides, we derive the consistency relation in the Galileon scenario, and find that it differs from the standard inflation. We also estimate the running of the scalar spectral index and find that it is in well agreement with the 95% CL constraint of the Planck 2015 results. Finally, we evaluate the local, equilateral, orthogonal, and enfolded non-Gaussianity parameters, and conclude that not only is the shape of non-Gaussianity approximately close to the equilateral one, but that it also satisfies the 68% CL bound from the Planck 2015 data.

Studying G-axion inflation model in light of PLANCK

With the Planck 2015 result, most of the well known canonical large field inflation models turned out to be strongly disfavored. Axion inflation is one of such models which is becoming marginalized with the increasing precession of CMB data. In this paper, we have shown that with a simple Galileon type modification to the marginally favored axion model calling G-axion, we can turn them into one of the most favored models with its detectable prediction of r and ns within its PLANCK 1σ range for a wide range of parameters. Interestingly it is this modification which plays the important role in turning the inflationary predictions to be independent of the explicit value of axion decay constant f. However, dynamics after the inflation turned out to have a non-trivial dependence on f. For each G-axion model there exists a critical value of fc such that for f>fc we have the oscillating phase after inflation and for f<fc we have non-oscillatory phase. Therefore, we obtained a range of sub-Planckian value of model parameters which give rise to consistent inflation. However for sub-Planckian axion decay constant the inflaton field configuration appeared to be singular after the end of inflation. To reheat the universe we, therefore, employ the instant preheating mechanism at the instant of first zero crossing of the inflaton. To our surprise, the instant preheating mechanism turned out to be inefficient as opposed to usual non-oscillatory quintessence model. For another class of G-axion model with super-Planckian axion decay constant, we performed in detail the reheating constraints analysis considering the latest PLANCK result.