Forecasting Inflation in Chile Using State-Space and Regime-Switching Models

October 1, 2000

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Format: Chicago

Francisco d Nadal De Simone. Forecasting Inflation in Chile Using State-Space and Regime-Switching Models, (USA: International Monetary Fund, 2000) accessed November 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper estimates two time-varying parameter models of Chilean inflation: a Phillips curve model and a small open economy model. Their out-of-sample forecasts are compared with those of simple Box-Jenkins models. The main findings are; forecasts that include the pre-announced inflation target as a regressor are relatively better; the Phillips curve model outperforms the small open economy model in out-of-sample forecasts; and although Box-Jenkins models outperform the two models for short-term out-of-sample forecasts, their superiority deteriorates in longer forecasts. Adding a Markov-switching process to the models does not explain much of the conditional variance of the forecast errors.

Subject: Economic forecasting, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Output gap, Prices, Production

Keywords: Inflation, Inflation forecasting, Inflation target, Inflation targeting, Markov-switching, Model of inflation, Monetary policy frameworks, Open economy, Open economy model, Output gap, Phillips curve, Phillips curve model, State-space models, Time series, WP

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/162
Stock No:

WPIEA1622000
ISBN:

9781451857863
ISSN:

1018-5941

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