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Activity Number:
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303
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Type:
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Topic Contributed
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Date/Time:
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Tuesday, August 4, 2009 : 10:30 AM to 12:20 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #303341 |
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Title:
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Revisions to PCE Inflation Measures: Implications for Monetary Policy
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Author(s):
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Dean Croushore*+
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Companies:
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University of Richmond
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Address:
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Robins School of Business, Richmond, VA, 23173,
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Keywords:
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real-time data ; data revisions ; inflation ; monetary policy
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Abstract:
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This paper examines the characteristics of the revisions to the inflation rate as measured by the PCE price index both including and excluding food and energy prices. These data series play a major role in the Federal Reserve's analysis of inflation. We examine the magnitude and patterns of revisions to both PCE inflation rates. The first question we pose is: What do data revisions look like? We run a variety of tests to see if the data revisions have desirable or exploitable properties. The second question we pose is related to the first: can we forecast data revisions in real time? The answer is that it is possible to forecast revisions from the initial release to August of the following year. Generally, the initial release of inflation is too low and is likely to be revised up. Policymakers should account for this predictability in setting monetary policy.
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