The Role of Economic Policy Uncertainty in Forecasting US Inflation Using a VARFIMA Model

Mehmet Balcilar, Rangan Gupta and Charl Jooste

No 15-12, Working Papers from Eastern Mediterranean University, Department of Economics

Abstract: We compare inflation forecasts of a vector fractionally integrated autoregressive moving average (VARFIMA) model against standard forecasting models. U.S. inflation forecasts improve when controlling for persistence and economic policy uncertainty (EPU). Importantly, the VARFIMA model, comprising of inflation and EPU, outperforms commonly used inflation forecast models.

Keywords: Inflation; long-range dependency; economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-for, nep-ger, nep-mac and nep-mon
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http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-12.pdf First version, 2014 (application/pdf)

Related works:
Working Paper: The Role of Economic Policy Uncertainty in Forecasting US Inflation Using a VARFIMA Model (2014)
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