Density forecasts of inflation: a quantile regression forest approach
Michele Lenza,
Inès Moutachaker and
Joan Paredes
No 2830, Working Paper Series from European Central Bank
Abstract:
Density forecasts of euro area inflation are a fundamental input for a medium-term oriented central bank, such as the European Central Bank (ECB). We show that a quantile regression forest, capturing a general non-linear relationship between euro area (headline and core) inflation and a large set of determinants, is competitive with state-of-the-art linear benchmarks and judgemental survey forecasts. The median forecasts of the quantile regression forest are very collinear with the ECB point inflation forecasts, displaying similar deviations from “linearity”. Given that the ECB modelling toolbox is overwhelmingly linear, this finding suggests that the expert judgement embedded in the ECB forecast may be characterized by some mild non-linearity. JEL Classification: C52, C53, E31, E37
Keywords: Inflation; Non-linearity; Quantile Regression Forest (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba, nep-eec and nep-mon
Note: 411196
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Citations: View citations in EconPapers (4)
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Related works:
Working Paper: Density forecasts of inflation: a quantile regression forest approach (2024) 
Working Paper: Density forecasts of inflation: a quantile regression forest approach (2023) 
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232830
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