Forecasting inflation, industrial output and exchange rates : a template study for India

Thomakos, Dimitrios D. and Bhattacharya, Prasad S. 2005, Forecasting inflation, industrial output and exchange rates : a template study for India, Indian economic review, vol. 40, no. 2, pp. 145-165.

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Title Forecasting inflation, industrial output and exchange rates : a template study for India
Author(s) Thomakos, Dimitrios D.
Bhattacharya, Prasad S.
Journal name Indian economic review
Volume number 40
Issue number 2
Start page 145
End page 165
Publisher University of Delhi
Place of publication Dehli, India
Publication date 2005
ISSN 0019-4670
Keyword(s) ARIMA
transfer function
vector autoregression
forecasting
inflation
industrial output
exchange rate
Summary This paper reports results from a forecasting study for inflation, industrial output and exchange rates for India. We cannot reject the null hypothesis for linearity for all series used except for the growth rate of the foreign exchange series and our analysis is based on linear models, ARIMA and bivariate transfer functions and restricted VAR. Forecasting performance is evaluated using the models’ root mean-squared error differences and Theil’s inequality coefficients from recursive origin static, fixed origin dynamic and rolling origin dynamic forecasts. For models based on weekly data, based on RMSEs, we find that the bivariate models improve upon the forecasts of the ARIMA model while for models based on monthly data the ARIMA model has almost always better performance. In choosing between the two bivariate models on the basis of RMSEs, our overall results tend to support the use of a restricted VAR, as this model had the best forecasting performance more frequently than the transfer function model.

Language eng
Field of Research 140303 Economic Models and Forecasting
HERDC Research category C1.1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30009098

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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