The Prediction Equation
Where; I(t+1) = {f[X(t)] + E*X(11,t+1)}/CPI(t); f[X(t)] = A + SUM[B(n)*DX(n,t)**2) + C(n)*DX(n,t) + D(n)*X(n,t-1); n = 1 to 12; DX(n,t) = X(n,t) - X(n,t-1) ; and; n X(n,t) n X(n,t) 1 Cash and Traveler Checks 7 Individual Loans 2 Other Check Deposits 8 Bank Held Gov't Debt 3 Demand Deposits 9 Other Bank Investment 4 Other Loans 10 Savings 5 Comercial Loans 11 FED Held Gov't Debt 6 Real Estate Loan 12 CPI(t-1) A = 3.18544 E = 1.27029 E-2 n B(n) C(n) D(n) 1 2.27364 E-2 -6.68723 E-2 -6.00026 E-2 2 4.75928 E-3 -9.94953 E-2 -3.43861 E-2 3 -9.99200 E-4 2.37615 E-3 -1.78246 E-5 4 -1.86761 E-5 4.86460 E-3 8.42774 E-3 5 3.21077 E-3 -2.75453 E-2 5.12235 E-3 6 -9.02170 E-2 3.06758 E-1 7.92440 E-2 7 -5.83964 E-3 1.24951 E-1 -1.98504 E-2 8 7.20666 E-3 -1.86342 E-2 5.46925 E-2 9 -1.82491 E-3 -2.19312 E-2 6.03587 E-2 10 -1.17732 E-6 -2.15496 E-3 -4.02140 E-3 11 -1.09966 E-2 -1.36005 E-2 -1.04321 E-1 12 5.22252 E-2 -2.19188 E-1 -7.63422 E-2 STATISTIIC CPI INFLATION CORRELATION COEFFICIENT 0.999971 0.815603 STANDARD DEVIATION 0.537837 2.46961 E-3 DEGREES OF FREEDOM 106 107 (Data from FRB St. Louis - Dec., 1972 Through Mar, 1985)