Forecasting Food Price Inflation in Developing Countries with Inflation Targeting Regimes: the Colombian Case
Eliana Gómez (),
Miguel I. Gómez (),
Luis F.Melo () and
José Torres ()
Authors registered in the RePEc Author Service: Luis Melo () and
Borradores de Economia from Banco de la Republica de Colombia
Many developing countries are adopting inflation targeting regimes to guide monetary policy decisions. In such countries the share of food in the consumption basket is high and policy makers often employ total inflation (as opposed to core inflation) to set inflationary targets. Therefore, central banks need to develop reliable models to forecast food inflation. Our literature review suggests that little has been done in the construction of models to forecast short-run food inflation in developing countries. We develop a model to improve short-run food inflation forecasts in Colombia. The model disaggregates food items according to economic theory and employs Flexible Least Squares given the presence of structural changes in the inflation series. We compare the performance of this new model to current models employed by the central bank. Next, we apply econometric methods to combine forecasts from alternative models and test whether such combination outperforms individual models. Our results indicate that forecasts can be improved by classifying food basket items according to unprocessed, processed and food away from home and by employing forecast combination techniques.
Keywords: Food Inflation; Time Series (search for similar items in EconPapers)
JEL-codes: C22 E31 Q11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Working Paper: Forecasting Food Price Inflation in Developing Countries with Inflation Targeting Regimes: the Colombian Case (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:409
Access Statistics for this paper
More papers in Borradores de Economia from Banco de la Republica de Colombia Cra 7 # 14-78. Contact information at EDIRC.
Bibliographic data for series maintained by Clorith Angélica Bahos Olivera ().