Short-Term Inflation Forecasting Models For Turkey and a Forecast Combination Analysis
AbstractIn this paper, we produce short term forecasts for the inflation in Turkey, using a large number of econometric models. In particular, we employ univariate models, decomposition based approaches (both in frequency and time domain), a Phillips curve motivated time varying parameter model, a suite of VAR and Bayesian VAR models and dynamic factor models. Our findings suggest that the models which incorporate more economic information outperform the benchmark random walk, and the relative performance of forecasts are on average 30 percent better for the first two quarters ahead. We further combine our forecasts by means of several weighting schemes. Results reveal that, the forecast combination leads to a reduction in forecast error compared to most of the models, although some of the individual models perform alike in certain horizons.
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Bibliographic InfoPaper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1209.
Date of creation: 2012
Date of revision:
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Short-term Forecasting; Forecast Combination;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-ARA-2012-03-28 (MENA - Middle East & North Africa)
- NEP-FOR-2012-03-28 (Forecasting)
- NEP-MON-2012-03-28 (Monetary Economics)
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