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Inflation Forecast: Just use the Disaggregate or Combine it with the Aggregate

  • Kausik Chaudhuri
  • Saumitra N. BhaduriEmail author
Original Article
  • 7 Downloads

Abstract

Using data from India, the paper provides three stylize facts about the inflation forecasting: (a) using disaggregate data helps to achieve gains in forecast accuracy relative to forecasting the aggregate inflation directly; (b) using weights derived from spillover index for component forecasting compared to the official weights or the criterion suggested by Bates and Granger further improves efficiency; (c) combining disaggregates along with aggregate data is beneficial for forecasting inflation. Results also highlights the fact that inclusion of too many disaggregates might result in efficiency loss in short-term forecasting but definitely results in gain for the medium-term.

Keywords

Spillover index Combination forecast Disaggregate information Inflation forecasting India 

JEL Classifications

C53 E31 

Notes

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Copyright information

© The Indian Econometric Society 2019

Authors and Affiliations

  1. 1.Leeds University Business School and Visiting Faulty-Indian Institute of ManagementBangaloreIndia
  2. 2.Madras School of EconomicsChennaiIndia

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