Short-term inflation projections model and its assessment in Latvia
This paper builds a short-term inflation projections (STIP) model for Latvia. The model is designed to forecast highly disaggregated consumer prices using cointegrated ARDL approach of [Pesaran, M., & Shin, Y. (1998). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2021-07-01
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| Series: | Baltic Journal of Economics |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/1406099X.2021.2003997 |
| Summary: | This paper builds a short-term inflation projections (STIP) model for Latvia. The model is designed to forecast highly disaggregated consumer prices using cointegrated ARDL approach of [Pesaran, M., & Shin, Y. (1998). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. Econometric Society Monographs, 31, 371–413.]. We assess the forecast accuracy of STIP model using out-of-sample forecast exercise and show that our model outperforms both aggregated and disaggregated AR(1) benchmarks. Across inflation components, the forecast accuracy gains are 20–30% forecasting 3 months ahead and 15–55% forecasting 12 months ahead. |
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| ISSN: | 1406-099X 2334-4385 |