Forecasting Growth and Inflation in an Enlarged Euro Area

Flavin, Thomas and Panopoulou, Ekaterini and Pantelidis, Theologos (2009) Forecasting Growth and Inflation in an Enlarged Euro Area. Journal of Forecasting, 28. pp. 405-435. ISSN 0277-6693

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We compare models for forecasting growth and inflation in the enlarged euro area. Forecasts are built from univariate autoregressive and single-equation models. The analysis is undertaken for both individual countries and EU aggregate variables. Aggregate forecasts are constructed by both employing aggregate variables and by aggregating country-specific forecasts. Using financial variables for country-specific forecasts tends to add little to the predictive ability of a simple AR model. However, they do help to predict EU aggregates. Furthermore, forecasts from pooling individual country models usually outperform those of the aggregate itself, particularly for the EU25 grouping. This is particularly interesting from the perspective of the European Central Bank, who require forecasts of economic activity and inflation to formulate appropriate economic policy across the enlarged group.

Item Type: Article
Keywords: forecasting; financial variables; growth; inflation; aggregation;
Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
Item ID: 8009
Identification Number: 10.1002/for.1117
Depositing User: Thomas Flavin
Date Deposited: 08 Mar 2017 15:17
Journal or Publication Title: Journal of Forecasting
Publisher: Wiley
Refereed: Yes

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