Economic Factors Predicting Inflation in the Us, England, France, and Germany

Abstract

In this study, the authors investigated the relationship between inflation and macroeconomic factors (namely, short and long term interest rates, unemployment, GDP, and percent debt) for France, Germany, England, and the United States. Time series and autoregressive analysis procedures were used to determine, for each country, the best predictive model over a 5 year period relating inflation as the dependent variable to macro-economic factors as the independent variables. Results showed that for England and the United States, GDP and year were good predictors of inflation. In France, factors that predicted inflation were growth rate and 10-year bond rate and in Germany the factors for predicting inflation were 10-year bond rate and inter bank rate. The models were very good in predicting inflation for the US and England. Prediction of inflation for France and Germany, was not as good as that for England and the United States