Density Forecasts Based on Disaggregate Data: Nowcasting Polish Inflation

Błażej Mazur



The paper investigates gains in performance of density forecasts from models using disaggregate data when forecasting aggregate series. The problem is considered within a restricted VAR framework with alternative sets of exclusion restrictions. Empirical analysis of Polish CPI m-o-m inflation rate (using its 14 sub-categories for disaggregate modelling) is presented. Exclusion restrictions are shown to improve density forecasting performance (as evaluated using log-score and CRPS criteria) relatively to aggregate and also disaggregate unrestricted models.


prediction; model comparison; density forecasting; inflation; VAR models; shrinkage

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ISSN (print) 1234-3862
ISSN (online) 2450-7067

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