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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)

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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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Publisher Info
Paper provided by Central Bank & Financial Services Authority of Ireland (CBFSAI) 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 listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert B. Litterman, 1985. "Forecasting with Bayesian vector autoregressions five years of experience," Working Papers 274, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  2. Frain, John, 1995. "Econometrics and Truth," Research Technical Papers 2/RT/95, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
  3. 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. [Downloadable!] (restricted)
  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. [Downloadable!]
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  5. 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. [Downloadable!] (restricted)
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  6. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian Var Models for Forecasting Irish Inflation," Research Technical Papers 4/RT/98, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
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  7. Stephen G. Cecchetti, 1996. "Inflation Indicators and Inflation Policy," NBER Working Papers 5161, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. 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. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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. [Downloadable!]
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  2. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian Var Models for Forecasting Irish Inflation," Research Technical Papers 4/RT/98, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
    Other versions:
  3. Meyler, Aidan, 1999. "A statistical measure of core inflation," MPRA Paper 11362, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Feridun, Mete, 2006. "Forecasting Inflation in Developing Nations: The Case of Pakistan," MPRA Paper 1024, University Library of Munich, Germany, revised 2006. [Downloadable!]
  5. 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). [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. Nicholai Benalal & Juan Luis Diaz del Hoyo & Bettina Landau & Moreno Roma & Frauke Skudelny, 2004. "To aggregate or not to aggregate? Euro area inflation forecasting," Working Paper Series 374, European Central Bank. [Downloadable!]
  8. Quinn, Terry & Kenny, Geoff & Meyler, Aidan, 1999. "Inflation Analysis: An Overview," Research Technical Papers 1/RT/99, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
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