CEMAP's reseach on inflation forecast methods will be published in Applied Economics

CEMAP's research on inflation forecast methods will be published in Applied Economics:
 
Research on disaggregated inflation forecast methods will be published. The paper aims to investigate whether predictions based on disaggregated data outperform predictions based only on aggregated data models. The results show that there are substantial gains by using disaggregated data in short horizons. In longer horizons there are gains compared to aggregated benchmark but these gains are lower.

The link to the paper is given below:

http://www.tandfonline.com/doi/full/10.1080/00036846.2016.1167824

 

ABSTRACT

This work aims to compare the forecast efficiency of different types of methodologies applied to Brazilian consumer inflation (Índice de Preços ao Consumidor Amplo; IPCA). We will compare forecasting models using disaggregated and aggregated data from IPCA over 12 months ahead. We used IPCA in a monthly basis, over the period between January 1996 and March 2012. Out-of-sample analysis will be made through the period of January 2008 to March 2012. The disaggregated models were estimated by Seasonal Autoregressive Integrated Moving Average (SARIMA) and will have different levels of disaggregation from IPCA as groups and items, as well as disaggregation with more economic sense used by Brazilian Central Bank as: (1) services, monitored prices, food and industrials and (2) durables, non-durables, semi-durables, services and monitored prices. Aggregated models will be estimated by time series techniques as SARIMA, state-space structural models and Markov-switching. The forecasting accuracy among models will be made by the selection model procedure known as Model Confidence Set developed by Peter Hansen, Asger Lunde and James Nason. We were able to find evidence of forecast accuracy gains in models using more disaggregated rather than aggregate data.

 

 

 

 

 

 

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