Forecasting inflation in the European Monetary Union: A disaggregated approach by countries and by sectors

Espasa, Antoni; Senra, Eva; Albacete, Rebeca

doi:10.1080/13518470210167284

Cited by 47 publications

(35 citation statements)

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“…The European Central Bank (ECB) later adopted this same breakdown. This paper updates the analysis in Espasa et al (2002) with a longer sample and obtains the same result of only one cointegration relationship between sectors. This model for the five sectors is also used in Section 4 for evaluating the inflation forecasts.…”

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confidence: 75%

“…7 Espasa et al (2002), for instance, consider disaggregation by sectors or by countries. In the methodology presented in this paper for forecasting a macro-variable, the disaggregation plays an important role and it is proposed that, when possible, it should be performed applying the double criterion of sectors and regions.…”

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confidence: 99%

“…The breakdown of HICP by sectors in the euro area as a whole is approached in Espasa et al (2002) by taking into account theoretical considerations about differences in supply and demand through sectors, which could result in prices having different trends. Following Espasa et al (1987), we consider the following sector price indexes:…”

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confidence: 99%

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Econometric modelling for short‐term inflation forecasting in the euro area

Espasa

Albacete

2007

Journal of Forecasting

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This paper examines the problem of forecasting macro-variables which are observed monthly (or quarterly) and result from geographical and sectorial aggregation. The aim is to formulate a methodology whereby all relevant information gathered in this context could provide more accurate forecasts, be frequently updated, and include a disaggregated explanation as useful information for decision-making. The appropriate treatment of the resulting disaggregated data set requires vector modelling, which captures the long-run restrictions between the different time series and the shortterm correlations existing between their stationary transformations. Frequently, due to a lack of degrees of freedom, the vector model must be restricted to a block-diagonal vector model. This methodology is applied in this paper to inflation in the euro area, and shows that disaggregated models with cointegration restrictions improve accuracy in forecasting aggregate macro-variables.

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Econometric modelling for short‐term inflation forecasting in the euro area

Espasa

Albacete

2007

Journal of Forecasting

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“…In the European context, there is the aggregation of the forecasts of individual countries to a euro area level; see for instance Espasa et al (2002), Marcellino et al (2003) and Benalal et al (2004). In this study, we will only address the aggregation of HICP component forecasts.…”

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confidence: 99%

Forecasting Inflation: An Art as Well as a Science!

Reijer

Vlaar

2006

De Economist

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“…If this is the case, inclusion of the cointegrated restriction would improve the results. Espasa, Senra, and Albacete (2002) and Espasa and Albacete (2004) show that vector models with cointegration restrictions provide better significant forecasts than aggregated models for inflation in the euro area. Also Minguez and Espasa (2003), breaking down the euro area GDP into four sectors and a fifth component corresponding to taxes less subsidies on products, found a significant and important long-run restriction relating the output of services to the outputs of three other sectors, taxes (with a negative coefficient) and a positive trend.…”

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Comments on “The Marshallian macroeconomic model: A progress report” by Arnold Zellner and Guillermo Israilevich

Espasa¹

2005

International Journal of Forecasting

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The paper has two parts. The first one contains a description of the development of the SEMTSA approach since the early 1970s, its applications to macroeconomic variables, the rationalisation of applied models using economic theory, and the extension to disaggregated models within the framework of Marshallian competitive models for production sectors. The second part is devoted to the theoretical derivation of different formulations of the Marshallian macroeconomic model with increasing complexity, starting with a one-sector model with supply, demand, and entry/exit equations, and continuing with models in the single-sector case but extended to demand and supply factor equations to end up with n-sector models, which are closed by the inclusion of government and money equations. In this part of the paper, the initial structural models are in differential equation form, leading to reduced form equations useful for forecasting purposes and discrete approximation proposals. In this process, the convergence properties of the main endogenous variables of the differential and difference equation models are illustrated for different values of the parameters and for given initial conditions. It is shown that the difference equation model can approach equilibrium values with oscillatory behaviour and that a wide range of solutions is possible. All this reveals the potential of this theoretical framework for structural analysis, forecasting, and policy simulation in applied macroeconomics.Professor Zellner is one of the most outstanding econometricians since the late 1950s, when he published his initial contributions on the consumption function. He has been a highly productive scholar in many fields, such as statistics, econometric theory, methodology, applied econometrics, etc. His research, no matter how theoretical and technical, is always conducted with the aim of producing results which could be used to obtain a better understanding of the real world, and this is why Professor Zellner's research has had such a broad and deep impact on modern econometrics. Today's paper is a very good example of this and is, in fact, highly significant for macroeconometrics. It explains the orientation linking the research in a long sequence of previous papers by the author with a number of important collaborators since the first famous Zellner and Palm paper was published in 1974. These results show that the strategy of developing appropriate and rigorous statisticaleconometric tools for building econometric models using a basic economic theory, which are then fitted to data to test how well they perform and to learn how they can be improved, has been very successful. This 0169-2070/$ -see front matter D

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Forecasting inflation in the European Monetary Union: A disaggregated approach by countries and by sectors

Cited by 47 publications

References 12 publications

Econometric modelling for short‐term inflation forecasting in the euro area

Econometric modelling for short‐term inflation forecasting in the euro area

Forecasting Inflation: An Art as Well as a Science!

Comments on “The Marshallian macroeconomic model: A progress report” by Arnold Zellner and Guillermo Israilevich

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