Non-Accelerating Inflation Rate of Unemployment, shortened to the unlovely acronym Nairu
In antiquity, animal entrails — ideally, the liver of a sacrificed sheep — would be scrutinized for clues of things to come.
In the postwar U.S., professional economists seeking to predict inflation opted for something a little less sanguinary: the Phillips Curve, named for the economist William Phillips.
In 2001, two economists at the University of California at Los Angeles — Andrew Atkeson and Lee Ohanian — published a paper based on an experiment that compared the predictive prowess of the Phillips Curve to a model that was simple to the point of parody: forecasting next year’s inflation by averaging the previous four quarters’ rates. In other words, next year’s inflation will be the same as the previous year’s. That’s it.
Marie Diron and Benoit Mojon. Their comparative “model” was even simpler: take a central bank’s inflation target and then use that number as a consistent prediction for inflation every single year.
Asking other people what they think will happen. While the professionals have a better track record over the very long term, there is an embarrassingly long stretch of time, 1984 to 2006, where average Americans narrowly edged out the professionals.
Stephen Mihm Bloomberg 21 January 2022
Yes, There Is a Trade-Off Between Inflation and Unemployment
https://englundmacro.blogspot.com/2019/09/yes-there-is-trade-off-between.html
Why Did Almost Nobody See Inflation Coming?
https://englundmacro.blogspot.com/2022/01/why-did-almost-nobody-see-inflation.html
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