Forecasting industry-level CPI and PPI inflation: Does exchange rate pass-through matter?
Prasad Bhattacharya () and
Dimitrios D. Thomakos
International Journal of Forecasting, 2008, vol. 24, issue 1, pages 134-150
We show that incorporating the effects of exchange rate pass-through into a model can help in obtaining superior forecasts of domestic, industry-level inflation. Our analysis is based on a multivariate system of domestic inflation, import prices and exchange rates that incorporates restrictions from economic theory. These are restrictions on the transmission channels of the exchange rate pass-through to domestic prices, and are presented as testable hypotheses that lead to model reduction. We provide the results of various tests, including causality and prior restrictions, which support the underlying economic arguments and the model we use. The forecasting results for our model suggest that it has a superior performance overall, jointly producing more accurate forecasts of domestic inflation.
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Forecasting Industry-Level CPI and PPI Inflation: Does Exchange Rate Pass-Through Matter? (2006)
Working Paper: Forecasting Industry-Level CPI and PPI Inflation: Does Exchange Rate Pass-Through Matter? (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eee:intfor:v:24:y:2008:i:1:p:134-150
Access Statistics for this article
International Journal of Forecasting is currently edited by R. J. Hyndman
More articles in International Journal of Forecasting from Elsevier
Series data maintained by Shamier, Wendy ().