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Short-Term Inflation Forecasting Models For Turkey and a Forecast Combination Analysis

Kurmaş Akdoğan, Selen Başer Andıç, Meltem Chadwick, Dilara Ertug, Timur Hulagu, Sevim Kösem (), Fethi Ogunc (), Utku Ozmen () and Necati Tekatli

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: In this paper, we produce short term forecasts for the inflation in Turkey, using a large number of econometric models. In particular, we employ univariate models, decomposition based approaches (both in frequency and time domain), a Phillips curve motivated time varying parameter model, a suite of VAR and Bayesian VAR models and dynamic factor models. Our findings suggest that the models which incorporate more economic information outperform the benchmark random walk, and the relative performance of forecasts are on average 30 percent better for the first two quarters ahead. We further combine our forecasts by means of several weighting schemes. Results reveal that, the forecast combination leads to a reduction in forecast error compared to most of the models, although some of the individual models perform alike in certain horizons.

Keywords: Short-term Forecasting; Forecast Combination (search for similar items in EconPapers)
JEL-codes: C52 C53 E37 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ara, nep-for and nep-mon
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Journal Article: Short-term inflation forecasting models for Turkey and a forecast combination analysis (2013) Downloads
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