Search for Predictors of Inflation Using VAR and BVAR: The Case of Czech Republic

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F14%3A10312080" target="_blank" >RIV/00216208:11230/14:10312080 - isvavai.cz</a>
Result on the web
<a href="http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/207" target="_blank" >http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/207</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Search for Predictors of Inflation Using VAR and BVAR: The Case of Czech Republic
Original language description
Forecasting inflation is generally considered a challenging task as forecasters face fundamental uncertainty about the proper selection of variables driving inflation dynamics. In this paper, we investigate the forecasting performance of variables representing economic activity, monetary policy and survey data within VAR and BVAR models. We propose a scoring algorithm to evaluate their forecasting performance based on various criteria such as the mean square error, the mean absolute error and the Diebold-Mariano test. A one-year horizon is considered for the forecasts and they are constructed by the chain rule using monthly data. We also determine the forecast accuracy on sub-periods, showing that in a low volatility periods the forecast accuracy can be significantly improved by selecting models using square-root errors. Our results suggest that the survey data have strong predictive power, especially when accompanied by a broad money measure. The survey data outperform also the indica
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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