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Unobserved Component Model for Forecasting Polish Inflation

Listed author(s):
  • Jacek Kwiatkowski

    ()

    (Nicolaus Copernicus University in Torun)

Registered author(s):

    This paper aims to use the local level models with GARCH and SV errors to predict Polish inflation. The series to be forecast, measured monthly, is consumer price index (CPI) in Poland during 1992-2008. We selected three forecasting models i.e. LL-GARCH(1,1) with Normal or Student errors and LL-SV. A simple AR(2)-SV model is used as a benchmark to assess the accuracy of prediction. The presented results indicate, that there is no clear advantage of LL models in forecasting Polish inflation over standard AR(2)-SV model, although all the models give satisfactory results.

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    File URL: http://www.dem.umk.pl/dem/archiwa/v10/10_JKwiatkowski.pdf
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    Article provided by Uniwersytet Mikolaja Kopernika in its journal Dynamic Econometric Models.

    Volume (Year): 10 (2010)
    Issue (Month): ()
    Pages: 121-129

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    Handle: RePEc:cpn:umkdem:v:10:y:2010:p:121-129
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    1. Gary Koop & Simon M. Potter, 2001. "Are apparent findings of nonlinearity due to structural instability in economic time series?," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-38.
    2. James H. Stock & Mark W. Watson, 2006. "Why Has U.S. Inflation Become Harder to Forecast?," NBER Working Papers 12324, National Bureau of Economic Research, Inc.
    3. James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 53.
    4. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    5. Grassi Stefano & Proietti Tommaso, 2010. "Has the Volatility of U.S. Inflation Changed and How?," Journal of Time Series Econometrics, De Gruyter, vol. 2(1), pages 1-22, September.
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