Do unobserved components models forecast inflation in Russia?

Bulat Gafarov

HSE Working papers from National Research University Higher School of Economics

Abstract: I apply the model with unobserved components and stochastic volatility (UC-SV) to forecast the Russian consumer price index. I extend the model which was previously suggested as a model for inflation forecasting in the USA to take into account a possible difference in model parameters and seasonal factor. Comparison of the out-of-sample forecasting performance of the linear AR model and the UC-SV model by mean squared error of prediction shows better results for the latter model. Relatively small absolute value of the standard error of the forecasts calculated by the UC-SV model makes it a reasonable candidate for a real time forecasting method for the Russian CPI.

Keywords: Stochastic volatility; MCMC; Russia; CPI; forecasting. (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-cis, nep-for, nep-mac and nep-tra
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Published in WP BRP Series: Economics / EC, September 2013, pages 1-14

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