Forecasting the duration of short‐term deflation episodes

Forecasting the duration of short‐term deflation episodes The paper proposes a simulation‐based approach to multistep probabilistic forecasting, applied for predicting the probability and duration of negative inflation. The essence of this approach is in counting runs simulated from a multivariate distribution representing the probabilistic forecasts, which enters the negative inflation regime. The marginal distributions of forecasts are estimated using the series of past forecast errors, and the joint distribution is obtained by a multivariate copula approach. This technique is applied for estimating the probability of negative inflation in China and its expected duration, with the marginal distributions computed by fitting weighted skew‐normal and two‐piece normal distributions to autoregressive moving average ex post forecast errors and using the multivariate Student t copula. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Forecasting Wiley

Forecasting the duration of short‐term deflation episodes

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Publisher
Wiley
Copyright
Copyright © 2018 John Wiley & Sons, Ltd.
ISSN
0277-6693
eISSN
1099-131X
DOI
10.1002/for.2514
Publisher site
See Article on Publisher Site

Abstract

The paper proposes a simulation‐based approach to multistep probabilistic forecasting, applied for predicting the probability and duration of negative inflation. The essence of this approach is in counting runs simulated from a multivariate distribution representing the probabilistic forecasts, which enters the negative inflation regime. The marginal distributions of forecasts are estimated using the series of past forecast errors, and the joint distribution is obtained by a multivariate copula approach. This technique is applied for estimating the probability of negative inflation in China and its expected duration, with the marginal distributions computed by fitting weighted skew‐normal and two‐piece normal distributions to autoregressive moving average ex post forecast errors and using the multivariate Student t copula.

Journal

Journal of Forecasting – Wiley

Published: Jan 1, 2018

Keywords: ; ; ; ; ;

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