Forecasting Korean inflation
In Choi and
Seong Jin Hwang ()
No 1202, Working Papers from Research Institute for Market Economy, Sogang University
This paper studies the performance of various forecasting models for Ko- rean inflation rates. The models studied in this paper are the AR(p) model, the dynamic predictive regression model with such exogenous variables as the un- employment rate and the term spread, the inflation target model, the random- walk model, and the dynamic predictive regression model using estimated fac- tors along with the unemployment rate and the term spread. The sampling period studied in this paper is 2000M11-2011M06. Among the studied models, the dynamic predictive regression model using estimated factors along with the unemployment rate and the term spread tends to perform best at the 6-month horizon when the factors are extracted from I(0) series and the variables for the factor extraction are selected by the criterion of the correlation of each variable with the inflation rate. The dynamic predictive regression models with the unemployment rate and the term spread also work well at shorter horizons.
Keywords: inflation forecasting; Phillips curve; term spread; factor model; principal-component estimation; generalized principal-component estimation (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sgo:wpaper:1202
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