Slicing up inflation: analysis and forecasting of Lithuanian inflation components

Julius Stakenas ()
Additional contact information
Julius Stakenas: Bank of Lithuania

No 56, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: In this paper we model five Lithuanian HICP subcomponents in a medium scale Bayesian VAR framework. We deal with the parameter proliferation problem by setting the appropriate amount of shrinkage determined in the out-of-sample forecasting exercise. The main body of the paper consists of displaying the model’s performance in two applications: forecasting and analysis of inflation determinants. We find the model’s forecasts to be competitive against the univariate statistical models, particularly in the cases of predicting processed food and energy goods inflation. What is more, exercises based on conditional forecasting show that these two indices make the best use of accurate conditional information in terms of improving predicting accuracy. In the decomposition of the drivers of HICP components, we demonstrate that both, domestic and foreign factors can be prevalent inflation determinants in certain time periods. We also find some evidence on employees’ bargaining power playing a role in determining the Lithuanian consumer price inflation.

Keywords: HICP subindices; Bayesian VAR; Bayesian shrinkage; inflation forecasting; structural decomposition (search for similar items in EconPapers)
JEL-codes: C32 C53 E37 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-12-28
New Economics Papers: this item is included in nep-for, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.lb.lt/uploads/publications/docs/21139_ ... eca78b1a0e9f75b4.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
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:lie:wpaper:56

Access Statistics for this paper

More papers in Bank of Lithuania Working Paper Series from Bank of Lithuania Bank of Lithuania Gedimino pr. 6, LT-01103 Vilnius, Lithuania. Contact information at EDIRC.
Bibliographic data for series maintained by Aurelija Proskute ().