Forecasting Inflation Through a Bottom-Up Approach: The Portuguese Case
The aim of this paper is to assess inflation forecasting acurracy over the short-term horizon using Consumer Price Index (CPI) disaggregated data. That is, aggregating forecasts is compared with aggregate forecasting. In particular, three questions are addressed: i) one should bottom-up or not, ii) how bottom one should go and iii) how one should model at the bottom. In contrast with the literature, di erent levels of data dis-aggregation are allowed, namely a higher disaggregation level than the one considered up to now. Moreover, both univariate and multivariate models are considered, such as SARIMA and SARIMAX models with dynamic common factors. An out-of-sample forecast comparison (up to twelve months ahead) is done using Portuguese CPI dataset. Aggregating the forecasts seems to be better than aggregate forecasting up to a five-months ahead horizon. Moreover, this improvement increases with the disaggregation level and the multivariate modelling outperforms the univariate one in the very short-run.
|Date of creation:||2005|
|Contact details of provider:|| Postal: R. do Ouro, 27, 1100 LISBOA|
Phone: 21 321 32 00
Fax: 21 346 48 43
Web page: https://www.bportugal.pt
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ptu:wpaper:w200502. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTDD)
If references are entirely missing, you can add them using this form.