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Proyección de la inflación agregada con modelos de vectores autorregresivos bayesianos

Author

Listed:
  • Carrera, Cesar

    (Banco Central de Reserva del Perú)

  • Ledesma, Alan

    (UC Santa Cruz)

Abstract

We forecast 18 groups of individual components of the Consumer Price Index (CPI) using a large Bayesian vector autoregressive model (BVAR) and then aggregate those forecasts in order to obtain a headline inflation forecast (bottom-up approach). De Mol et al. (2006) and Banbura et al. (2010) show that BVAR's forecasts can be significantly improved by the appropriate selection of the shrinkage hyperparameter. We follow Banbura et al. (2010)'s strategy of "mixed priors," estimate the shrinkage parameter, and forecast inflation. Our findings suggest that this strategy for modeling outperform the benchmark random walk as well as other strategies for forecasting inflation.

Suggested Citation

  • Carrera, Cesar & Ledesma, Alan, 2015. "Proyección de la inflación agregada con modelos de vectores autorregresivos bayesianos," Working Papers 2015-003, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2015-003
    as

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    References listed on IDEAS

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