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Short-term inflation projections: A Bayesian vector autoregressive approach

Author

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  • Giannone, Domenico
  • Lenza, Michele
  • Momferatou, Daphne
  • Onorante, Luca

Abstract

In this paper we construct a large Bayesian Vector Autoregressive model (BVAR) for the Euro area that captures the complex dynamic inter-relationships between the main components of the Harmonized Index of Consumer Prices (HICP) and their determinants. The model generates accurate conditional and unconditional forecasts in real-time. We find a significant pass-through effect of oil-price shocks on core inflation and a strong Phillips curve during the Great Recession.

Suggested Citation

  • Giannone, Domenico & Lenza, Michele & Momferatou, Daphne & Onorante, Luca, 2014. "Short-term inflation projections: A Bayesian vector autoregressive approach," International Journal of Forecasting, Elsevier, vol. 30(3), pages 635-644.
  • Handle: RePEc:eee:intfor:v:30:y:2014:i:3:p:635-644
    DOI: 10.1016/j.ijforecast.2013.01.012
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    More about this item

    Keywords

    Vector Autoregression; Forecasting; Real-time; Phillips curve;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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