Forecasting Inflation in Open Economies: What Can a NOEM Model DO? Supplementary Materials

Duncan, Roberto; Martínez‐García, Enrique

doi:10.24149/gwp235appr1

Cited by 2 publications

(26 citation statements)

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“…1 7 Tables A1 A4 in the Online Appendix contain detailed information for each economy (Duncan and Martínez-García (2022)). In Table A1 we have nine (rather than ten) di¤erent forecasts because the iterated and direct methods are equivalent when h = 1.…”

Section: Resultsmentioning

confidence: 99%

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Forecasting Inflation in Open Economies: What Can a NOEM Model DO?

Duncan¹,

Martínez‐García²

2022

gwp

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This paper evaluates the forecasting ability when inflation is viewed as an inherently global phenomenon through the lens of the workhorse New Open Economy Macro (NOEM) model. The NOEM model emphasizes the importance of cross-country spillovers arising through trade and its reduced form solution can be represented by a finite-order VAR which provides a tractable model of inflation forecasting. We use Bayesian techniques to estimate this VAR specification-we name it NOEM-BVAR-and pseudo-out-of-sample forecasts to assess its forecasting performance at different horizons in a diverse set of 18 countries. On average, the NOEM-BVAR specification produces a similar or even lower root mean square prediction error (RMSPE) than its standard competitors, which include both purely statistical models and theoretically-based forecasting models (e.g., Phillipscurve-type alternatives and others with global inflation measures). In a number of cases, the gains in smaller RMSPEs are statistically significant, especially at short horizons. The NOEM-BVAR model is also accurate in predicting the direction of change for inflation and is often better than its competitors along this dimension as well. Even though purely statistical models can be useful prediction tools, the NOEM-BVAR is attractive among those forecasting models motivated by economic theory.

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Section: Resultsmentioning

confidence: 99%

“…1 8 Tables A5 A8 in the Online Appendix (Duncan and Martínez-García (2022)) report additional information at the country level for the four forecast horizons used in the exercise.…”

Section: Resultsmentioning

confidence: 99%

Forecasting Inflation in Open Economies: What Can a NOEM Model DO?

Duncan¹,

Martínez‐García²

2022

gwp

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“…Our findings are presented in Tables A22 and A23 in the supporting information (Duncan & Martínez‐García, 2022).…”

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confidence: 78%

“…5 5 There is also a not‐for‐publication supporting information that reports more detailed results (Duncan & Martínez‐García, 2022). …”

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confidence: 99%

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Forecasting inflation in open economies: What can a NOEM model do?

Duncan

Martínez‐García

2023

Journal of Forecasting

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This paper evaluates the forecasting ability when inflation is viewed as an inherently global phenomenon through the lens of the workhorse New Open Economy Macro (NOEM) model. The NOEM model emphasizes the importance of cross‐country spillovers arising through trade, and its reduced form solution can be represented by a finite‐order VAR that provides a tractable model of inflation forecasting. We use Bayesian techniques to estimate this VAR specification—we name it NOEM‐BVAR—and pseudo‐out‐of‐sample forecasts to assess its forecasting performance at different horizons in a diverse set of 18 countries. On average, the NOEM‐BVAR specification produces a similar or even lower root mean square prediction error (RMSPE) than its standard competitors, which include both purely statistical models and theoretically‐based forecasting models (e.g., Phillips‐curve‐type alternatives and others with global inflation measures). In a number of cases, the gains in smaller RMSPEs are statistically significant, especially at short horizons. The NOEM‐BVAR model is also accurate in predicting the direction of change for inflation and is often better than its competitors along this dimension as well. Even though purely statistical models can be useful as prediction tools, the NOEM‐BVAR is an attractive tool among those forecasting models motivated by economic theory.

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Forecasting Inflation in Open Economies: What Can a NOEM Model DO? Supplementary Materials

Cited by 2 publications

References 0 publications

Forecasting Inflation in Open Economies: What Can a NOEM Model DO?

Forecasting Inflation in Open Economies: What Can a NOEM Model DO?

Forecasting inflation in open economies: What can a NOEM model do?

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