Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153301
Authors: 
Hofmann, Boris
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper No. 867
Abstract: 
This paper assesses the performance of monetary indicators as well as of a large range of economic and financial indicators in predicting euro area HICP inflation out-of-sample over the period first quarter 1999 till third quarter 2006 considering standard bivariate forecasting models, factor models, simple combination forecasts as well as trivariate two-pillar Phillips Curve forecasting models using both ex-post revised and real-time data. The results suggest that the predictive ability of money-based forecasts relative to a simple random walk benchmark model was high at medium-term forecasting horizons in the early years of EMU, but has substantially deteriorated recently. A significantly improved forecasting performance vis-à-vis the random walk can, however, be achieved based on the ECB’s internal M3 series corrected for the effects of portfolio shifts and by combining monetary and economic indicators.
Subjects: 
euro area
inflation
leading indicators
Money
JEL: 
E31
E40
C32
Document Type: 
Working Paper

Files in This Item:
File
Size
812.06 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.