Can Demographics improve the forecast accuracy of Inflation? Evidence from United Kingdom
(2016) NEKN01 20161Department of Economics
- Abstract
- This paper seeks to determine whether demographics can increase the forecasting accuracy of United Kingdom’s inflation rate. Five forecasting models were employed, namely: the benchmark ARMA model, the SW (2002) model with and without a demographic factor and the FHLR(2003) model with and without a demographic factor. Both the out of sample and the in-sample forecast results indicates that, factor models with a demographic factor have a relatively lower RMSE than the corresponding models without demographic factor. And among the five models considered, the FHLR (2003) model has a lower RMSE relative to both the SW (2002) model and the ARMA model, while the SW (2002) model also has a lower RMSE relative to the ARMA model. The DM-test for... (More)
- This paper seeks to determine whether demographics can increase the forecasting accuracy of United Kingdom’s inflation rate. Five forecasting models were employed, namely: the benchmark ARMA model, the SW (2002) model with and without a demographic factor and the FHLR(2003) model with and without a demographic factor. Both the out of sample and the in-sample forecast results indicates that, factor models with a demographic factor have a relatively lower RMSE than the corresponding models without demographic factor. And among the five models considered, the FHLR (2003) model has a lower RMSE relative to both the SW (2002) model and the ARMA model, while the SW (2002) model also has a lower RMSE relative to the ARMA model. The DM-test for equal forecasting accuracy indicates that the SW (2002) model with a demographic factor have a superior forecasting accuracy relative to the corresponding model without a demographic factor. Similar results were found with the FHLR (2003) model with and without a demographic factor. Thus, among the four factor models, the two models with a demographic factor systematically outperform the corresponding two models without a demographic factor. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8891058
- author
- Saidy, Dodou LU
- supervisor
- organization
- course
- NEKN01 20161
- year
- 2016
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Forecasting, Inflation, Demographics, RMSE, DM-test, Stock and Watson (2002), Forni et al (2003)
- language
- English
- id
- 8891058
- date added to LUP
- 2016-09-09 14:02:30
- date last changed
- 2016-09-09 14:02:30
@misc{8891058, abstract = {{This paper seeks to determine whether demographics can increase the forecasting accuracy of United Kingdom’s inflation rate. Five forecasting models were employed, namely: the benchmark ARMA model, the SW (2002) model with and without a demographic factor and the FHLR(2003) model with and without a demographic factor. Both the out of sample and the in-sample forecast results indicates that, factor models with a demographic factor have a relatively lower RMSE than the corresponding models without demographic factor. And among the five models considered, the FHLR (2003) model has a lower RMSE relative to both the SW (2002) model and the ARMA model, while the SW (2002) model also has a lower RMSE relative to the ARMA model. The DM-test for equal forecasting accuracy indicates that the SW (2002) model with a demographic factor have a superior forecasting accuracy relative to the corresponding model without a demographic factor. Similar results were found with the FHLR (2003) model with and without a demographic factor. Thus, among the four factor models, the two models with a demographic factor systematically outperform the corresponding two models without a demographic factor.}}, author = {{Saidy, Dodou}}, language = {{eng}}, note = {{Student Paper}}, title = {{Can Demographics improve the forecast accuracy of Inflation? Evidence from United Kingdom}}, year = {{2016}}, }