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Evaluation of Short Run Inflation Forecasts in Chile

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  • Pablo Pincheira
  • Roberto Álvarez

Abstract

The Central Bank of Chile builds inflation forecasts for several time horizons and using various methodologies. In this paper, we analyze one of these series of short-term inflation forecasts, which we call Auxiliary Inflation Forecasts (AIF), comparing them to forecasts made by private analysts and to forecasts built from simple time-series models. We also evaluate the AIF using encompassing tests and bias and weak efficiency tests. Our aim is to answer two linked questions: first, which is the best forecast series under a specific loss function? and second, are the differences of accuracy between any two series of forecasts totally explained by the differences in the information sets from which they have been built? Our results indicate that the AIF behave extremely well at one- and two-month horizons, but they are less adequate at longer horizons.

Suggested Citation

  • Pablo Pincheira & Roberto Álvarez, 2012. "Evaluation of Short Run Inflation Forecasts in Chile," Working Papers Central Bank of Chile 674, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:674
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    References listed on IDEAS

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    Cited by:

    1. Pablo Pincheira B. & Nicolás Fernández, 2011. "Jaque Mate a las Proyecciones de Consenso," Working Papers Central Bank of Chile 630, Central Bank of Chile.
    2. Pablo Pincheira & Carlos A. Medel, 2012. "Forecasting Inflation with a Simple and Accurate Benchmark: a Cross-Country Analysis," Working Papers Central Bank of Chile 677, Central Bank of Chile.
    3. Pablo Pincheira, 2012. "A Joint Test of Superior Predictive Ability for Chilean Inflation Forecasts," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 15(3), pages 04-39, December.

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