Forecasting Inflation through Econometrics Models: An Empirical Study on Pakistani Data

  • SM Husnain Bokhari Junior Joint Director, Statistics Department, State Bank of Pakistan, Karachi, Pakistan
  • Mete Feridun Lecturer in Economics, Finance and Business, Faculty of Economics and Administrative Studies, Cyprus International University, Nicosia Cyprus
Keywords: Modeling and Forecasting Inflation, ARIMA, VAR

Abstract

This article aims at modeling and forecasting inflation in Pakistan. For this purpose a number of econometric approaches are implemented and their results are compared. In ARIMA models, adding additional lags for p and/or q necessarily reduced the sum of squares of the estimated residuals. When a model is estimated using lagged variables, some observations are lost. Results further indicate that the VAR models do not perform better than the ARIMA (2, 1, 2) models and, the two factor model with ARIMA (2, 1, 2,) slightly performs better than the ARIMA (2, 1, 2). Although the study focuses on the problem of macroeconomic forecasting, the empirical results have more general implications for small scale macroeconometric models.
Key words: Modeling and Forecasting Inflation, ARIMA, VAR
The Information Technologist Vol.2(1) 2005: 15-21
Published
2005-07-05
Section
Articles

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eISSN: 1597-4316