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A FAN CHART FOR INFLATION RATE FORECASTS IN ROMANIA

Mihaela Bratu
Authors registered in the RePEc Author Service: Mihaela Simionescu

Revista Economica, 2012, vol. Supplement, issue 4, 71-80

Abstract: For an inflation targeting Central Bank, like The National Bank of Romania, the transparency of the target regime and the credibility of the politics based on it are very important objectives. Moreover, the forecasts offered to the public are a mirror of the professionalism in anticipating the macroeconomic evolution. These goals are very well accomplished by the inflation fan charts, an important instrument used to reflect the uncertainty in predicting a phenomenon. This uncertainty is amplified in crises periods. Therefore it is strongly recommended the use of an objective mean that reflects the uncertainty in the economic evolution. In contrast to the simple BNR methodology, based on an aggregate indicator of error type, the fan chart facilitates the establishment of monetary policy, taking into account the probabilities that the rate of inflation fall in some specific intervals in each period of the forecast horizon. In this paper, I built a fan chart for the inflation rate in Romania on forecasting horizon 2011 Q1-2013 Q4, noticing a tendency of decrease for inflation over the mentioned period.

Date: 2012
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