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Inflation Forecast: Just use the Disaggregate or Combine it with the Aggregate

Author

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  • Kausik Chaudhuri

    (Leeds University Business School and Visiting Faulty-Indian Institute of Management)

  • Saumitra N. Bhaduri

    (Madras School of Economics)

Abstract

Using data from India, the paper provides three stylize facts about the inflation forecasting: (a) using disaggregate data helps to achieve gains in forecast accuracy relative to forecasting the aggregate inflation directly; (b) using weights derived from spillover index for component forecasting compared to the official weights or the criterion suggested by Bates and Granger further improves efficiency; (c) combining disaggregates along with aggregate data is beneficial for forecasting inflation. Results also highlights the fact that inclusion of too many disaggregates might result in efficiency loss in short-term forecasting but definitely results in gain for the medium-term.

Suggested Citation

  • Kausik Chaudhuri & Saumitra N. Bhaduri, 2019. "Inflation Forecast: Just use the Disaggregate or Combine it with the Aggregate," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(2), pages 331-343, June.
    • Handle: RePEc:spr:jqecon:v:17:y:2019:i:2:d:10.1007_s40953-019-00155-1
    DOI: 10.1007/s40953-019-00155-1
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    References listed on IDEAS

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    Cited by:

    1. Rishabh Choudhary & Chetan Ghate & Md Arbaj Meman, 2023. "Forecasting Core Inflation in India: A Four-Step Approach," IEG Working Papers 461, Institute of Economic Growth.

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