This paper proposes an empirical investigation of the impact of oil price forecast errors on inflation forecast errors for two different sets of recent forecasts data: the median of SPF inflation forecasts for the U.S. and the Central Bank inflation forecasts for France. Mainly two salient points emerge from our results. First, there is a significant contribution of oil price forecast errors to the explanation of inflation forecast errors, whatever the country or the period considered. Second, the pass-through of oil price forecast errors to inflation forecast errors is multiplied by around 2 when the oil price volatility is large.
Frédérique Bec and Annabelle De Gaye
Classification JEL : C22, E31, E37
Keywords : Forecast errors, Inflation rate, Oil price, Threshold model
Updated on: 06/12/2018 11:00