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G-7 Inflation Forecasts

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  • Canova, Fabio

Abstract

This Paper compares the forecasting performance of some leading models of inflation for the cross section of G-7 countries. We show that bivariate and trivariate models suggested by economic theory or statistical analysis are hardly better than univariate models. Phillips curve specifications fit well into this class. Significant improvements in both the MSE of the forecasts and turning point prediction are obtained with time-varying coefficients models that exploit international interdependencies. The performance of the latter class of models is independent of the sample, while it is not the case for standard specifications.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3283.

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Date of creation: Mar 2002
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Handle: RePEc:cpr:ceprdp:3283

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Keywords: forecasting; inflation; markov chain monte carlo methods; panel var models;

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  17. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061546, December.
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