Araştırma Makalesi
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Learning from Errors While Forecasting Inflation: A Case for Intercept Correction

Yıl 2019, Cilt 11, Sayı 1, 24 - 38, 05.04.2019
https://doi.org/10.33818/ier.304468

Öz


Structural changes are quite common in macroeconomic time series. Internal/external shock(s) may cause significant structural change in any economy. Simplest form of such change is observed as shift in constant of an underlying relationship between a pair of macroeconomic variables. Forecasting from such a model assuming no structural break is tantamount to ignoring the important aspects of underlying economy and mostly results in forecast failure. Intercept correction (adjustment for the realized forecast error) is a method for accommodating such ignored structural break(s). We use a simple model to forecast inflation (based upon single lag of money supply growth) for 25 countries and compare its performance with a) the same model with optimal intercept correction, b) the same model with half intercept correction, and c) a random walk model (with drift). Optimal intercept correction approach outperforms in forecasting next period inflation compared to one from a) the same model without intercept correction, b) the same model with half intercept correction, and c) random walk model.  We also observe that higher correction is needed for countries with more volatile inflation.  

Kaynakça

  • Castle, J. L., Clements, M. P., and Hendry, D. F. (2016), “An Overview of Forecasting Facing Breaks”, Journal of Business Cycle Research, Vol. 12, 3-23
  • Clements, M. P. and Hendry, D. F. (1996), “Intercept Correction and Structural Change”, Journal of Applied Econometrics, Vol. 11, 475-494
  • Hanif, M. N. and Malik, M. J. (2015), “Evaluating Performance of Inflation Forecasting Models of Pakistan”, Research Bulletin. Vol. 11. No. 1
  • Stock, J. H. and Watson, M. W. (2008), “Philips Curve Inflation Forecasts”, Conference Series; [proceedings], Federal Reserve Bank of Boston, Vol. 53

Yıl 2019, Cilt 11, Sayı 1, 24 - 38, 05.04.2019
https://doi.org/10.33818/ier.304468

Öz

Kaynakça

  • Castle, J. L., Clements, M. P., and Hendry, D. F. (2016), “An Overview of Forecasting Facing Breaks”, Journal of Business Cycle Research, Vol. 12, 3-23
  • Clements, M. P. and Hendry, D. F. (1996), “Intercept Correction and Structural Change”, Journal of Applied Econometrics, Vol. 11, 475-494
  • Hanif, M. N. and Malik, M. J. (2015), “Evaluating Performance of Inflation Forecasting Models of Pakistan”, Research Bulletin. Vol. 11. No. 1
  • Stock, J. H. and Watson, M. W. (2008), “Philips Curve Inflation Forecasts”, Conference Series; [proceedings], Federal Reserve Bank of Boston, Vol. 53

Ayrıntılar

Birincil Dil İngilizce
Konular İşletme
Bölüm Makaleler
Yazarlar

Muhammad Nadim HANİF
State Bank of Pakistan
Pakistan


Jahanzeb MALİK Bu kişi benim
State Bank of Pakistan
Pakistan

Yayımlanma Tarihi 5 Nisan 2019
Yayınlandığı Sayı Yıl 2019, Cilt 11, Sayı 1

Kaynak Göster

Bibtex @araştırma makalesi { ier304468, journal = {International Econometric Review}, issn = {1308-8793}, eissn = {1308-8815}, address = {Şairler Sokak, No:32/C, Gaziosmanpaşa, Ankara}, publisher = {Ekonometrik Araştırmalar Derneği}, year = {2019}, volume = {11}, pages = {24 - 38}, doi = {10.33818/ier.304468}, title = {Learning from Errors While Forecasting Inflation: A Case for Intercept Correction}, key = {cite}, author = {Hanif, Muhammad Nadim and Malik, Jahanzeb} }
APA Hanif, M. N. & Malik, J. (2019). Learning from Errors While Forecasting Inflation: A Case for Intercept Correction . International Econometric Review , 11 (1) , 24-38 . DOI: 10.33818/ier.304468
MLA Hanif, M. N. , Malik, J. "Learning from Errors While Forecasting Inflation: A Case for Intercept Correction" . International Econometric Review 11 (2019 ): 24-38 <https://dergipark.org.tr/tr/pub/ier/issue/44997/304468>
Chicago Hanif, M. N. , Malik, J. "Learning from Errors While Forecasting Inflation: A Case for Intercept Correction". International Econometric Review 11 (2019 ): 24-38
RIS TY - JOUR T1 - Learning from Errors While Forecasting Inflation: A Case for Intercept Correction AU - Muhammad Nadim Hanif , Jahanzeb Malik Y1 - 2019 PY - 2019 N1 - doi: 10.33818/ier.304468 DO - 10.33818/ier.304468 T2 - International Econometric Review JF - Journal JO - JOR SP - 24 EP - 38 VL - 11 IS - 1 SN - 1308-8793-1308-8815 M3 - doi: 10.33818/ier.304468 UR - https://doi.org/10.33818/ier.304468 Y2 - 2019 ER -
EndNote %0 International Econometric Review Learning from Errors While Forecasting Inflation: A Case for Intercept Correction %A Muhammad Nadim Hanif , Jahanzeb Malik %T Learning from Errors While Forecasting Inflation: A Case for Intercept Correction %D 2019 %J International Econometric Review %P 1308-8793-1308-8815 %V 11 %N 1 %R doi: 10.33818/ier.304468 %U 10.33818/ier.304468
ISNAD Hanif, Muhammad Nadim , Malik, Jahanzeb . "Learning from Errors While Forecasting Inflation: A Case for Intercept Correction". International Econometric Review 11 / 1 (Nisan 2019): 24-38 . https://doi.org/10.33818/ier.304468
AMA Hanif M. N. , Malik J. Learning from Errors While Forecasting Inflation: A Case for Intercept Correction. IER. 2019; 11(1): 24-38.
Vancouver Hanif M. N. , Malik J. Learning from Errors While Forecasting Inflation: A Case for Intercept Correction. International Econometric Review. 2019; 11(1): 24-38.
IEEE M. N. Hanif ve J. Malik , "Learning from Errors While Forecasting Inflation: A Case for Intercept Correction", International Econometric Review, c. 11, sayı. 1, ss. 24-38, Nis. 2019, doi:10.33818/ier.304468