ARIMA models of the price level: An assessment of the multilevel adaptive learning process in the USA
✍ Scribed by Pami Dua; Subhash C. Ray
- Publisher
- John Wiley and Sons
- Year
- 1992
- Tongue
- English
- Weight
- 502 KB
- Volume
- 11
- Category
- Article
- ISSN
- 0277-6693
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✦ Synopsis
This paper estimates the ARIMA processes for the observed and expected price level corresponding to the three-level adaptive expectations model proposed by Jacobs and Jones (1980). These univariate processes are then compared with the best-fit ARIMA model. The results indicate that the best-fit model for the observed price level is a restricted version of the twolevel adaptive learning process specified in terms of prices, suggesting a simple adaptive rule in the inflation rate. A comparison of the time-series forecasts from the best-fit model with the mean responses to the ASA-NBER survey shows no significant difference in their accuracy. The time-series forecasts are, however, conditionally efficient. The best-fit ARIMA model for expected prices measured by the ASA-NBER consensus forecasts does not correspond to any version of the Jacobs and Jones model.