G-7 Inflation Forecasts

46 Pages Posted: 17 Jan 2003  

Fabio Canova

Universitat Pompeu Fabra - Department of Economics and Business (DEB); European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Southampton - Division of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: June 2002

Abstract

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

Canova, Fabio, G-7 Inflation Forecasts (June 2002). ECB Working Paper No. 151. Available at SSRN: https://ssrn.com/abstract=357920

Fabio Canova (Contact Author)

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

University of Southampton - Division of Economics

Southampton, SO17 1BJ
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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