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Density forecasts of inflation: a quantile regression forest approach

Michele Lenza, Inès Moutachaker and Joan Paredes

No 2830, Working Paper Series from European Central Bank

Abstract: Density forecasts of euro area inflation are a fundamental input for a medium-term oriented central bank, such as the European Central Bank (ECB). We show that a quantile regression forest, capturing a general non-linear relationship between euro area (headline and core) inflation and a large set of determinants, is competitive with state-of-the-art linear benchmarks and judgemental survey forecasts. The median forecasts of the quantile regression forest are very collinear with the ECB point inflation forecasts, displaying similar deviations from “linearity”. Given that the ECB modelling toolbox is overwhelmingly linear, this finding suggests that the expert judgement embedded in the ECB forecast may be characterized by some mild non-linearity. JEL Classification: C52, C53, E31, E37

Keywords: Inflation; Non-linearity; Quantile Regression Forest (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba, nep-eec and nep-mon
Note: 411196
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Density forecasts of inflation: a quantile regression forest approach (2024) Downloads
Working Paper: Density forecasts of inflation: a quantile regression forest approach (2023) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232830

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