Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329279 
Year of Publication: 
2024
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 12 [Issue:] 12 [Article No.:] 352 [Year:] 2024 [Pages:] 1-27
Publisher: 
MDPI, Basel
Abstract: 
The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some events, such as Eid al-Fitr and fuel price adjustments, still cannot be accommodated in the TSpVARX model. This condition causes inflation and money outflow forecasting using TSpVARX to be unsatisfactory. Our study is to improve the forecasting performance of the TSpVARX model by adding subset and dummy variables. We use a 12th lag subset variable to capture seasonal effects and a dummy variable to represent fuel price changes. These additions enhance the model's accuracy in forecasting inflation and money outflow by accounting for recurring patterns and specific events, like fuel price changes. Based on the RMSE values of the training and testing data, we can conclude that forecasting inflation and money outflow using TSpVARX with the addition of subset and dummy variables is better than the regular TSpVARX. The inflation and money outflow forecasting generated after the addition of subset and dummy variables are also more fluctuating as in the movement of the actual data.
Subjects: 
nonlinear time series
threshold spatial
SpVAR
inflation
subset variable
TSpVARX
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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