An Evaluation of Alternative Methods of Forecasting Australian Inflation

Lakshman Alles and Dean Horton

Australian Economic Review, 1999, vol. 32, issue 3, 237-248

Abstract: The purpose of this paper is to evaluate the forecast of Australian inflation based on four alternative procedures: a univariate time series model, an interest rate model, an error correction model and a public survey of inflation forecasts. We derive estimates of expected and unexpected inflation from each of the methods and compare the out‐of‐sample forecasting results. Based on a range of evaluation criteria, the time series model dominates the other models, with the interest rate model, the error correction model and the survey forecasts following in that order.

Date: 1999
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