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Forecasting inflation with online prices

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  • Aparicio, Diego
  • Bertolotto, Manuel I.

Abstract

Are survey-based forecasts unbeatable? They are not. This paper uses online price indices to forecast the Consumer Price Index. We find that online price indices anticipate changes in official inflation trends more than one month in advance. Our baseline one-month forecast outperforms Bloomberg surveys of forecasters, which only predict the contemporaneous inflation rate. Our baseline specification also outperforms statistical benchmark forecasts for Australia, Canada, France, Germany, Greece, Ireland, Italy, the Netherlands, the United Kingdom, and the United States. Similarly, our quarterly forecast for the US inflation rate substantially outperforms the Survey of Professional Forecasters.

Suggested Citation

  • Aparicio, Diego & Bertolotto, Manuel I., 2020. "Forecasting inflation with online prices," International Journal of Forecasting, Elsevier, vol. 36(2), pages 232-247.
    • Handle: RePEc:eee:intfor:v:36:y:2020:i:2:p:232-247
    DOI: 10.1016/j.ijforecast.2019.04.018
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    2. Barkan, Oren & Benchimol, Jonathan & Caspi, Itamar & Cohen, Eliya & Hammer, Allon & Koenigstein, Noam, 2023. "Forecasting CPI inflation components with Hierarchical Recurrent Neural Networks," International Journal of Forecasting, Elsevier, vol. 39(3), pages 1145-1162.
    3. Macias, Paweł & Stelmasiak, Damian & Szafranek, Karol, 2023. "Nowcasting food inflation with a massive amount of online prices," International Journal of Forecasting, Elsevier, vol. 39(2), pages 809-826.
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    5. Beck, Günter W. & Carstensen, Kai & Menz, Jan-Oliver & Schnorrenberger, Richard & Wieland, Elisabeth, 2023. "Nowcasting consumer price inflation using high-frequency scanner data: Evidence from Germany," Discussion Papers 34/2023, Deutsche Bundesbank.
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    7. Dedola, Luca & Ehrmann, Michael & Hoffmann, Peter & Lamo, Ana & Paz-Pardo, Gonzalo & Slacalek, Jiri & Strasser, Georg, 2023. "Digitalisation and the economy," Working Paper Series 2809, European Central Bank.
    8. Diego Aparicio & Alberto Cavallo, 2021. "Targeted Price Controls on Supermarket Products," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 60-71, March.
    9. Barış Soybilgen & M. Ege Yazgan & Hüseyin Kaya, 2023. "Nowcasting Turkish Food Inflation Using Daily Online Prices," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 19(2), pages 171-190, September.

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