Forecasting Spanish inflation using information from different sectors and geographical areas
AbstractThis paper evaluates different strategies to forecast Spanish inflation using information of price series for 57 products and 18 regions in Spain. We consider vector equilibrium correction (VeqC) models that include cointegration relationships between Spanish prices and prices in the regions of Valencia, Andalusia, Madrid, Catalonia and the Basque Country. This approach is consistent with economic intuition and is shown to be of tangible importance after suitable econometric evaluation. It is found that inflation forecasts can always be improved by aggregating projections from differente sectors and geographical areas. Moreover, cointegration relationships between regional and national prices must be considered in order to obtain a significantly better inflation forecast.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws080101.
Date of creation: Jan 2008
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Vector equilibrium correction models; Relative prices; Cointegration; Disaggregation;
Find related papers by JEL classification:
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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