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Time Series Modeling of Inflation and its Volatility in Croatia

Igor Živko () and Mile Bošnjak ()
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Igor Živko: Faculty of Economics and Business,University of Mostar
Mile Bošnjak: Faculty of Economics and Business,University of Zagreb

Notitia - journal for sustainable development, 2017, vol. 1, issue 3, 1-10

Abstract: Croatian National Bank is not targeting inflation but exchange rate as the nominal anchor or intermediary goal of monetary policy and inflation in Croatia is a dominantly foreign driven phenomenon. Using monthly data on CPI in Croatia from January 1997 up to November 2015, ARIMA (0,1,1) x (0,1,1)12 model is fitted asthe one describing CPI behavior pattern and therefore reliable for CPI forecasting. Furthermore, to establish its volatility pattern several ARCH family models are tested and ARCH (1) model is found to be the best fitted one in explaining CPI volatility development in Croatia.

Keywords: CPI; ARIMA; ARCH; Croatia (search for similar items in EconPapers)
JEL-codes: C22 C58 E31 E37 F39 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:noa:journl:y:2017:i:3:p:1-10