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Forecasting Irish inflation using ARIMA models

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Author Info

  • Kenny, Geoff

    (Central Bank and Financial Services Authority of Ireland)

  • Meyler, Aidan

    (Central Bank and Financial Services Authority of Ireland)

  • Quinn, Terry

    (Central Bank and Financial Services Authority of Ireland)

Abstract

This paper outlines the practical steps which need to be undertaken to use autoregressive integrated moving average (ARIMA) time series models for forecasting Irish inflation. A framework for ARIMA forecasting is drawn up. It considers two alternative approaches to the issue of identifying ARIMA models - the Box Jenkins approach and the objective penalty function methods. The emphasis is on forecast performance which suggests more focus on minimising out-of-sample forecast errors than on maximising in-sample 'goodness of fit'. Thus, the approach followed is unashamedly one of 'model mining' with the aim of optimising forecast performance. Practical issues in ARIMA time series forecasting are illustrated with reference to the harmonised index of consumer prices (HICP) and some of its major sub-components.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 3/RT/98.

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Length: 48 pages
Date of creation: Dec 1998
Date of revision:
Handle: RePEc:cbi:wpaper:3/rt/98

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References

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  1. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian Var Models for Forecasting Irish Inflation," Research Technical Papers 4/RT/98, Central Bank of Ireland.
  2. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 123-166 National Bureau of Economic Research, Inc.
  3. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  4. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc.
  5. Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February.
  6. Stephen G. Cecchetti, 1995. "Inflation Indicators and Inflation Policy," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 189-236 National Bureau of Economic Research, Inc.
  7. Víctor Gómez & Agustín Maravall, 1998. "Automatic Modeling Methods for Univariate Series," Banco de Espa�a Working Papers 9808, Banco de Espa�a.
  8. Robert B. Litterman, 1985. "Forecasting with Bayesian vector autoregressions five years of experience," Working Papers 274, Federal Reserve Bank of Minneapolis.
  9. Stockton, David J & Glassman, James E, 1987. "An Evaluation of the Forecast Performance of Alternative Models of Inflation," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 108-17, February.
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Citations

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Cited by:
  1. Meyler, Aidan, 1999. "The non-accelerating inflation rate of unemployment (NAIRU) in a small open economy: The irish context," MPRA Paper 11363, University Library of Munich, Germany.
  2. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian VAR Models for Forecasting Irish Inflation," MPRA Paper 11360, University Library of Munich, Germany.
  3. repec:asg:wpaper:1014 is not listed on IDEAS
  4. Quinn, Terry & Kenny, Geoff & Meyler, Aidan, 1999. "Inflation Analysis: An Overview," MPRA Paper 11361, University Library of Munich, Germany.
  5. Akhter, Tahsina, 2013. "Short-Term Forecasting of Inflation in Bangladesh with Seasonal ARIMA Processes," MPRA Paper 43729, University Library of Munich, Germany.
  6. Benalal, Nicholai & Diaz del Hoyo, Juan Luis & Landau, Bettina & Roma, Moreno & Skudelny, Frauke, 2004. "To aggregate or not to aggregate? Euro area inflation forecasting," Working Paper Series 0374, European Central Bank.
  7. repec:asg:wpaper:1027 is not listed on IDEAS
  8. Meyler, Aidan, 1999. "A Statistical Measure Of Core Inflation," Research Technical Papers 2/RT/99, Central Bank of Ireland.
  9. Feridun, Mete, 2006. "Forecasting Inflation in Developing Nations: The Case of Pakistan," MPRA Paper 1024, University Library of Munich, Germany, revised 2006.
  10. Aguilar, Ruben & Valdivia, Daney, 2011. "Precios de exportación de gas natural para Bolivia: Modelación y pooling de pronósticos
    [Bolivian natural gas export prices: Modeling and forecast pooling]
    ," MPRA Paper 35485, University Library of Munich, Germany.
  11. Jeff Tayman & Stanley Smith & Jeffrey Lin, 2007. "Precision, bias, and uncertainty for state population forecasts: an exploratory analysis of time series models," Population Research and Policy Review, Springer, vol. 26(3), pages 347-369, June.
  12. Friedrich Fritzer & Gabriel Moser & Johann Scharler, 2002. "Forecasting Austrian HICP and its Components using VAR and ARIMA Models," Working Papers 73, Oesterreichische Nationalbank (Austrian Central Bank).

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