IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

A Comparison Of The Var Model And The Pc Factor Model In Forecasting Inflation In Montenegro

  • Milena Lipovina-Božović
Registered author(s):

    Montenegro started using the euro in 2002 and regained independence in 2006. Its main economic partners are European countries, yet inflation movements in Montenegro do not coincide with consumer price fluctuations in the eurozone. Trying to develop a useful forecasting model for Montenegrin inflation, we compare the results of a three-variable vector autoregression (VAR) model, and a principle component (PC) factor model starting with twelve variables. The estimation period is January 2001 to December 2012, and the control months are the first six months of 2013. The results show that in forecasting inflation, despite a high level of Montenegrin economic dependence on international developments, more reliable forecasts are achieved with the use of additional information on a larger number of factors, which includes domestic economic activity.

    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://ea.ekof.bg.ac.rs/pdf/198/283.pdf
    Download Restriction: no

    Article provided by Faculty of Economics, University of Belgrade in its journal Economic Annals.

    Volume (Year): 58 (2013)
    Issue (Month): 198 (July - September)
    Pages: 115-136

    as
    in new window

    Handle: RePEc:beo:journl:v:58:y:2013:i:198:p:115-136
    Contact details of provider: Postal: KAMENICKA 6 - 11000 BEOGRAD
    Phone: (381 11) 302122
    Fax: (381 11) 639 560
    Web page: http://www.ekof.bg.ac.rs/
    Email:


    More information through EDIRC

    Order Information: Web: http://ea.ekof.bg.ac.rs/ Email:


    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.:

    as in new window
    1. Anindya Banerjee & Massimiliano Marcellino, 2003. "Are There Any Reliable Leading Indicators for U.S. Inflation and GDP Growth?," Working Papers 236, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Angelini, Elena & Henry, Jérôme & Mestre, Ricardo, 2001. "Diffusion index-based inflation forecasts for the euro area," Working Paper Series 0061, European Central Bank.
    3. Mark W. Watson & James H. Stock, 2004. "Combination forecasts of output growth in a seven-country data set," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(6), pages 405-430.
    4. George Kapetanios & Gonzalo Camba-Mendez, 2005. "Forecasting euro area inflation using dynamic factor measures of underlying inflation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(7), pages 491-503.
    5. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
    6. Boivin, Jean & Ng, Serena, 2006. "Are more data always better for factor analysis?," Journal of Econometrics, Elsevier, vol. 132(1), pages 169-194, May.
    7. Matheson, Troy D, 2006. "Factor Model Forecasts for New Zealand," MPRA Paper 807, University Library of Munich, Germany.
    8. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
    9. Davor Kunovac, 2007. "Factor Model Forecasting of Inflation in Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 31(4), pages 371-393.
    10. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February.
    11. Israel Sancho & maximo Camacho, 2002. "Spanish diffusion indexes," Computing in Economics and Finance 2002 276, Society for Computational Economics.
    12. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
    13. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
    14. Massimiliano Marcellino, 2008. "A linear benchmark for forecasting GDP growth and inflation?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(4), pages 305-340.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:beo:journl:v:58:y:2013:i:198:p:115-136. 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: (Goran Petrić)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.