46 Pages Posted: 17 Jan 2003
Date Written: June 2002
This paper compares the forecasting performance of some leading models of inflation for the cross section of G-7 countries. We show that bivariate and trivariate models suggested by economic theory or statistical analysis are hardly better than univariate models. Phillips curve specifications fit well into this class. Significant improvements in both the MSE of the forecasts and turning point prediction are obtained with time varying coefficient models which exploit international interdependencies. The performance of the latter class of models is independent of the sample, while it is not the case for standard specifications.
Keywords: Forecasting, Inflation, Panel VAR models, Markov Chain Monte Carlo Methods
JEL Classification: E0, E5
Suggested Citation: Suggested Citation
Canova, Fabio, G-7 Inflation Forecasts (June 2002). ECB Working Paper No. 151. Available at SSRN: https://ssrn.com/abstract=357920