Stock and Watson model for forecasting Polish inflation
DOI:
https://doi.org/10.12775/AUNC_ECON.2009.034Keywords
local level model, inflation, conditional heteroscedasticity, Bayesian predictionAbstract
The paper presents various types of local level model, which are based on Stock and Watson’s model, recently proposed forU.S.inflation. The main purpose is to use many different local level model specifications, especially with Normal GARCH and Student-t GARCH disturbances, to predict Polish inflation. The paper is a full Bayesian analysis and concerns Consumer Price Index (CPI) inPolandduring 1992-2008. The presented results indicate, that standard AR(2)-SV is quite suitable for the prediction of Polish inflation.
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