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Forecasting the duration of short-term deflation episodes

Charemza, W; Makarova, S; Wu, Y; (2018) Forecasting the duration of short-term deflation episodes. Journal of Forecasting , 37 (4) pp. 475-488. 10.1002/for.2514. Green open access

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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.

Type: Article
Title: Forecasting the duration of short-term deflation episodes
Open access status: An open access version is available from UCL Discovery
DOI: 10.1002/for.2514
Publisher version: https://doi.org/10.1002/for.2514
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: duration forecast, inflation forecasting, multivariate copula analysis, negative inflation, probabilistic forecasting, simulation
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/10040133
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