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Forecasting Inflation in an Inflation Targeting Economy: Structural Versus Non-Structural Models


  • Rangan Gupta

    () (Department of Economics, University of Pretoria)


We propose a comparison between a group of nested and non-nested atheoretical and theoretical models in forecasting the inflation rate for South Africa, an inflation-targeting country. In a pseudo real-time environment, our results show that for shorter horizons, the atheoretical models, such as Vector Error Correction Models, with and without factors, perform better, while for longer horizons, theoretical (DSGE based) models outperform their competitors.

Suggested Citation

  • Rangan Gupta, 2015. "Forecasting Inflation in an Inflation Targeting Economy: Structural Versus Non-Structural Models," Working Papers 201547, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201547

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    Inflation; South Africa; Structural; Atheoretical; Factors; DSGE;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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