It can be shown that inflation expectations and associated forecast errors are characterized by a high degree of … persistence. One reason may be that forecasters cannot directly observe the inflation target pursued by the central bank and … inflation rate is due to a permanent change of policy parameters or whether it is the result of a transient shock. Consequently …

Motivated by economic-theory concepts - the Fisher hypothesis and the theory of the term structure - we consider a … small set of simple bivariate closed-loop time-series models for the prediction of price inflation and of long- and short …