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Unobserved Component Model for Forecasting Polish Inflation

Author

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  • Jacek Kwiatkowski

    (Nicolaus Copernicus University in Torun)

Abstract

This paper aims to use the local level models with GARCH and SV errors to predict Polish inflation. The series to be forecast, measured monthly, is consumer price index (CPI) in Poland during 1992-2008. We selected three forecasting models i.e. LL-GARCH(1,1) with Normal or Student errors and LL-SV. A simple AR(2)-SV model is used as a benchmark to assess the accuracy of prediction. The presented results indicate, that there is no clear advantage of LL models in forecasting Polish inflation over standard AR(2)-SV model, although all the models give satisfactory results.

Suggested Citation

  • Jacek Kwiatkowski, 2010. "Unobserved Component Model for Forecasting Polish Inflation," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 10, pages 121-129.
    • Handle: RePEc:cpn:umkdem:v:10:y:2010:p:121-129
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    References listed on IDEAS

    as
    1. James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
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    3. Gary Koop & Simon M. Potter, 2001. "Are apparent findings of nonlinearity due to structural instability in economic time series?," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-38.
    4. Grassi Stefano & Proietti Tommaso, 2010. "Has the Volatility of U.S. Inflation Changed and How?," Journal of Time Series Econometrics, De Gruyter, vol. 2(1), pages 1-22, September.
    5. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    6. repec:cte:wsrepe:ws072706 is not listed on IDEAS
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