Advanced Search
MyIDEAS: Login to save this paper or follow this series

Inflation forecasting and the crisis: assessing the impact on the performance of different forecasting models and methods

Contents:

Author Info

  • Christian Buelens
Registered author(s):

    Abstract

    This paper analyses how euro area inflation forecasts have been affected by the financial and economic crisis. Its first objective is to evaluate the accuracy of three representative groups of inflation forecasting models (rules of thumb and benchmark models; autoregressive moving average models; autoregressive distributed lag models) under a direct and an indirect approach, respectively. The second objective of the paper is to study how the absolute and relative forecasting performances of the models and approaches have been impacted by the economic and financial crisis. The paper finds that direct forecasting models selected on the basis of a penalty function generally dominate simple benchmark models. The analysis furthermore suggests that when an appropriate specification for the component-specific models is found, indirect forecasts outperform the corresponding direct forecasts. Nonetheless, in line with the findings from earlier studies, there are insufficient elements to assert a systematic superiority of one of the two approaches. Concerning the second objective, the across-the-board rise in the forecast errors of all models considered, confirms that inflation forecasting has become substantially more difficult after the onset of the crisis. However, the deterioration of the different models has been uneven: indeed, direct autoregressive distributed lag models and indirect models improved in relative terms during the crisis.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp451_en.htm
    Download Restriction: no

    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 451.

    as in new window
    Length: 37 pages
    Date of creation: Mar 2012
    Date of revision:
    Handle: RePEc:euf:ecopap:0451

    Contact details of provider:
    Postal: Coomunivcations Unit, B-1049 Bruxelles / Brussels
    Fax: +32 2 298.08.23
    Email:
    Web page: http://ec.europa.eu/economy_finance/index_en.htm
    More information through EDIRC

    Related research

    Keywords:

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0451. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.