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AI-Based Forecasting of Czech Inflation: Quantile Regression Forests with Dynamic Weights

Author

Listed:
  • Filip Blaha
  • Jan Botka
  • Josef Sveda
  • Ales Michl

Abstract

We construct a quantile regression forest for inflation forecasting in the Czech Republic, inspired by growing literature on the use of Machine Learning in macroeconomics and finance. We contribute to the literature by implementing an optimisation scheme with time-varying weights that incorporates information from the entire distribution to form the point forecast. By dynamically reflecting the distribution of future inflation paths, our framework outperforms both standard mean and median point forecasts and delivers gains relative to conventional linear benchmark models. We also forecast individual inflation subcomponents that enable us to disentangle the drivers of future inflation and its risks. Furthermore, we integrate the Shapley-value decomposition to enhance the interpretability of our results and adjust the model's predictors for a small open economy.

Suggested Citation

  • Filip Blaha & Jan Botka & Josef Sveda & Ales Michl, 2026. "AI-Based Forecasting of Czech Inflation: Quantile Regression Forests with Dynamic Weights," Working Papers 2026/09, Czech National Bank, Research and Statistics Department.
    • Handle: RePEc:cnb:wpaper:2026/09
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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