Partisan Inflation Forecast Error Graph

partisan_graph_Gandrud.R

################
# Partisan Inflation Forecast Error Graph
# Christopher Gandrud
# Updated 22 December 2011
################

library(foreign)
library(ggplot2)

## Load data

### Fed inflation forecast error data is from: http://www.phil.frb.org/research-and-data/real-time-center/greenbook-data/
### Actual inflation data is from the FRED database: http://research.stlouisfed.org/fred2/

### For a further description of how the data was compiled in order to be comparable see: http://christophergandrud.blogspot.com/2011/12/federal-reserve-internal-inflation.html

cpi.data <- read.dta("~/GB_FRED_cpi.dta")

## Clean up data and create forecast error variable
cpi.data$pres_party <- factor(cpi.data$pres_party, label = c("Dem", "Rep"))
cpi.data$error.prop.deflator.q2 <-  (cpi.data$GB_CPI_QTR2 - cpi.data$deflator)/cpi.data$deflator

## Create graph using ggplot2
preElection <- ggplot(cpi.data, aes(x = time_to_election, y = error.prop.deflator.q2))
    preElection <- preElection + geom_point(aes(color = pres_party)) 
    preElection <- preElection + stat_smooth(method = "loess", aes(group = pres_party, color = pres_party, fill = pres_party))
    preElection <- preElection + scale_color_manual(values = c("blue", "red"), name = "") 
    preElection <- preElection + scale_fill_manual(values = c("blue", "red"), name = "") 
    preElection <- preElection + coord_trans(x = "reverse")
    preElection <- preElection + xlab("Quarters to Election") + ylab("Error/Actual") + opts(title = "Green Book Infl. Forecast Error\nMade 2 Qts Earlier as a Prop. of Actual Inflation\nby Pres. Party (1964 - 2005)")
    preElection <- preElection + theme_bw() + opts(panel.grid.minor = theme_blank()) + opts(axis.line = theme_segment()) + opts(axis.title.y = theme_text(angle = 90, size = 12, vjust = 0))


print(preElection)