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A new proposal for forecasting inflation in the eurozone. A global model

Author

Listed:
  • Georgios Angelopoulos

    (Department of Accounting and Finance, University of West Attica and Bank of Greece)

  • Zacharias Bragoudakis

    (Bank of Greece)

  • Dimitrios Dimitriou

    (Department of Accounting and Finance, University of West Attica)

  • Alexandros Tsioutsios

    (Department of Economics and UoA Center for Financial Studies, School of Economics and Political Sciences, National and Kapodistrian University of Athens)

Abstract

This paper evaluates the forecasting performance of the relatively new machine learning Global Unrefined (GlobalUN, hereafter) model with respect to inflation in the Eurozone. In this global pooled neural network framework, we use a quarterly panel dataset covering 20 euro-area countries (2001Q1–2025Q1) together with the EA-20 aggregate, which includes key variables such as HICP, energy prices, food, and others. Thus, the network remains simple yet flexible enough to absorb heterogeneity across countries. Our contribution of our work is crucial since monetary policy in the Eurozone hinges on accurate inflation forecasts (i.e., as ECB decisions target expected rather than current inflation). Our findings are crystal clear. The GlobalUn model outperforms all other benchmark models and the advanced machine learning XGBoost model in almost all Eurozone countries and horizons (i.e., the NAà VE model seems to outperform in a few cases). These results are useful for policymakers, central banks, and fiscal institutions, as they should take the GlobalUN model into account as part of their arsenal.

Suggested Citation

  • Georgios Angelopoulos & Zacharias Bragoudakis & Dimitrios Dimitriou & Alexandros Tsioutsios, 2025. "A new proposal for forecasting inflation in the eurozone. A global model," Working Papers 350, Bank of Greece.
    • Handle: RePEc:bog:wpaper:350
    DOI: 10.52903/wp2025350
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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