Do Riksbanken produce unbiased forecast of the inflation rate?: and can it be improved?
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
The focus of this paper is to evaluate if forecast produced by the Central Bank of Sweden (Riksbanken) for the 12 month change in the consumer price index is unbiased? Results shows that for shorter horizons (h < 12) the mean forecast error is unbiased but for longer horizons its negatively biased when inference is done by Maximum entropy bootstrap technique. Can the unbiasedness be improved by strict ap- pliance to econometric methodology? Forecasting with a linear univariate model (seasonal ARIMA) and a multivariate model Vector Error Correction model (VECM) shows that when controlling for the presence of structural breaks VECM outperforms both prediction produced Riksbanken and ARIMA. However Riksbanken had the best precision in their forecast, estimated as MSFE
Place, publisher, year, edition, pages
2011. , 59 p.
Inflation rate, Vector Error Correction Model, Structural breaks, Rolling-event forecast, Maximum Entropy bootstrapping, Autoregressive Integrated Moving Average
IdentifiersURN: urn:nbn:se:su:diva-58708OAI: oai:DiVA.org:su-58708DiVA: diva2:421516
UppsokSocial and Behavioural Science, Law
Lundholm, Michael, Professor
Alexius, Annika, Professor