Bilinear forecast risk assessment for non-systematic inflation: Theory and evidence

Wojciech Charemza, Yuriy Kharin () and Vladislav Maevskiy

No 12/22, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: The paper aims at assessing the forecast risk and the maximum admissible forecast horizon for the non-systematic component of inflation modeled autoregressively, where a distortion is caused by a simple first-order bilinear process. The concept of the guaranteed upper risk of forecasting and the d-admissible distortion level is defined here. In order to make this concept operational we propose a method of evaluation of the p-maximum admissible forecast risk, on the basis of the maximum likelihood estimates of the bilinear coefficient. It has been found that for the majority of developed countries (in terms of average GDP per capita) the maximum admissible forecast horizon is between 5 and 12 months, while for the poorer countries it is either shorter than 5 or longer than 12. There is also a negative correlation of the maximum admissible forecast horizon with the average GDP growth.

Keywords: Forecasting; Inflation; Bilinear Processes (search for similar items in EconPapers)
JEL-codes: C22 C53 E31 E37 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp12-22.pdf (application/pdf)

Related works:
Chapter: Bilinear Forecast Risk Assessment for Non-systematic Inflation: Theory and Evidence (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lec:leecon:12/22

Ordering information: This working paper can be ordered from
https://www2.le.ac.u ... -1/discussion-papers

Access Statistics for this paper

More papers in Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester School of Business, University of Leicester, University Road. Leicester. LE1 7RH. UK Provider-Homepage: https://le.ac.uk/school-of-business. Contact information at EDIRC.
Bibliographic data for series maintained by Abbie Sleath ().