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External vs. domestic factors to forecast the inflation in dollarized economy

Author

Listed:
  • Paul Carrillo-Maldonado

    (Centro de Investigaciones Económicas y Empresariales, Universidad de las Américas, Quito, Ecuador)

  • Jeniffer Rubio

    (Centro de Investigaciones Económicas y Empresariales, Universidad de las Américas, Quito, Ecuador)

  • Susana Herrero-Olarte

    (Centro de Investigaciones Económicas y Empresariales, Universidad de las Américas, Quito, Ecuador)

Abstract

In this paper we evaluate the influence of external and domestic factors for forecasting inflation in a small, open and dollarized economy. We estimate different econometric models for time series to identify the precision to forecast the inflation of Ecuadorian economy. We also implemented least square, quantile regression and stochastic volatility proposals to compare the same specification. The results show that models that include external factors are more accurate in the short term, while in the medium term, it is explained more by internal factors. Quantile regression is practical because it captures the determinants of inflation at different levels.

Suggested Citation

  • Paul Carrillo-Maldonado & Jeniffer Rubio & Susana Herrero-Olarte, 2025. "External vs. domestic factors to forecast the inflation in dollarized economy," Economics Bulletin, AccessEcon, vol. 45(4), pages 1972-1979.
    • Handle: RePEc:ebl:ecbull:eb-25-00065
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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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