UK inflation forecasts since the thirteenth century

Vol: 
32/2021
Author name: 
Nason JM
Smith GW
Year: 
2021
Month: 
March
Abstract: 

Historians have suggested there were waves of inflation or price revolutions in the UK (and earlier England) in the 13th, 16th, and 18th centuries, prior to the ongoing inflation since 1914. We study retail price inflation since 1251 and model its forecasts. The model is an AR(n) but allows for gradually evolving or drifting parameters and stochastic volatility. The long-horizon forecasts suggest only one inflation wave, that of the 20th century. We also use the model to measure inflation predictability and price-level instability from the beginning of the sample and to provide measures of real interest rates since 1695.

Publication file: 

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