Publication: Forecasting inflation using survey expectations and target inflation: evidence for Brazil and Turkey
Program
KU-Authors
KU Authors
Co-Authors
Advisor
Publication Date
Language
English
Type
Journal Title
Journal ISSN
Volume Title
Abstract
In this paper, we formulate a statistical model of inflation that combines data on survey expectations with the inflation target set by central banks. Our model produces inflation forecasts that are aligned with survey expectations, thus integrating the predictive power of the survey expectations into the baseline model. Furthermore, we incorporate the inflation target set by the monetary authority in order to examine the effectiveness of monetary policy in forming inflation expectations, and therefore, in predicting inflation accurately. The results indicate that the predictive power of the proposed framework is superior to that of the model without survey expectations, as well as to the performances of several popular benchmarks, such as the backward- and forward-looking Phillips curves and a naive forecasting rule. (C) 2015 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.
Description
Source:
International Journal of Forecasting
Publisher:
Elsevier
Keywords:
Subject
Economics, Management