Forecasting Inflation with Online Prices

30 Pages Posted: 14 Jun 2016 Last revised: 30 Sep 2017

See all articles by Diego Aparicio

Diego Aparicio

University of Navarra, IESE Business School

Manuel Bertolotto

Universidad de San Andrés; University of San Andres (UMSA) - Department of Economics

Date Written: June 1, 2017

Abstract

Are survey-based forecasts unbeatable? They are not. This paper introduces online price indices to forecast the Consumer Price Index. We find that online price indices anticipate changes in official inflation trends more than one month in advance. Our baseline one-month and two-month-ahead forecasts substantially outperform Bloomberg surveys of forecasters, which only predict the contemporaneous inflation rate. Our baseline specification also outperforms statistical benchmark forecasts for Australia, Canada, France, Germany, Greece, Ireland, Italy, the Netherlands, the United Kingdom, and the United States. Similarly, our quarterly forecast for the US inflation rate consistently outperforms the Survey of Professional Forecasters.

Keywords: Forecasting, Inflation, Survey of Professional Forecasts, Online Prices.

JEL Classification: C53, E31, E37

Suggested Citation

Aparicio, Diego and Bertolotto, Manuel and Bertolotto, Manuel, Forecasting Inflation with Online Prices (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2740600 or http://dx.doi.org/10.2139/ssrn.2740600

Diego Aparicio

University of Navarra, IESE Business School ( email )

Carrer d'Arnus i de Gari, 3-7
Barcelona
Spain

Manuel Bertolotto (Contact Author)

Universidad de San Andrés ( email )

Vito Dumas 284
(1644) Victoria, Pcia
Buenos Aires, Buenos Aires 1644
Argentina

University of San Andres (UMSA) - Department of Economics ( email )

Vito Dumas 284
B1644BID Victoria, Buenos Aires
Argentina

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