Economic Review

1988

 
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Sep/Oct, 1988

The Forecast Performance of Alternative Models of Inflation

Yash P. Mehra

It is inappropriate to ignore the behavior of money in explaining the generation and evolution of aggregate inflation over time. It is shown that over the period 1977 to 1987 an inflation model based on M2 demand describes more accurately the actual behavior of inflation than an expectations-augmented version of the Phillips curve.

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