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Inflation forecasting in the new EU Member States

Author

Listed:
  • Arratibel, Olga
  • Leiner-Killinger, Nadine
  • Kamps, Christophe

Abstract

To the best of our knowledge, our paper is the first systematic study of the predictive power of monetary aggregates for future inflation for the cross section of New EU Member States. This paper provides stylized facts on monetary versus non-monetary (economic and fiscal) determinants of inflation in these countries as well as formal econometric evidence on the forecast performance of a large set of monetary and nonmonetary indicators. The forecast evaluation results suggest that, as has been found for other countries before, it is difficult to find models that significantly outperform a simple benchmark, especially at short forecast horizons. Nevertheless, monetary indicators are found to contain useful information for predicting inflation at longer (3-year) horizons. JEL Classification: C53, E31, E37, E51, E52, E62, P24

Suggested Citation

  • Arratibel, Olga & Leiner-Killinger, Nadine & Kamps, Christophe, 2009. "Inflation forecasting in the new EU Member States," Working Paper Series 1015, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091015
    Note: 337289
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1015.pdf
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    References listed on IDEAS

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    2. Meri Papavangjeli, 2019. "Forecasting the Albanian short-term inflation through a Bayesian VAR model," IHEID Working Papers 16-2019, Economics Section, The Graduate Institute of International Studies, revised 09 Oct 2019.
    3. Karen Poghosyan & Ruben Poghosyan, 2021. "On the Applicability of Dynamic Factor Models for Forecasting Real GDP Growth in Armenia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 71(1), pages 52-79, June.
    4. Afees A. Salisu & Raymond Swaray & Hadiza Sa'id, 2021. "Improving forecasting accuracy of the Phillips curve in OECD countries: The role of commodity prices," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2946-2975, April.
    5. International Monetary Fund, 2014. "Republic of Lithuania: Selected Issues," IMF Staff Country Reports 2014/114, International Monetary Fund.
    6. Liew, Freddy, 2012. "Forecasting inflation in Asian economies," MPRA Paper 36781, University Library of Munich, Germany.

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    More about this item

    Keywords

    fiscal policy; inflation forecasting; information content of money; Leading indicators; monetary policy; new EU member states;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • 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
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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