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Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia

Inflation is one of the most substantial elements in the analysis of a country’s economy. It describes the general increment of the price of goods and services in a country. The interaction between inflation and economic growth are closely related. A high inflation rate would bring a negative impact...

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Main Authors: Nur A’mirah Mohd Yaziz, Mohd Rosli Mohamad, Hasif Rafidee Hasbollah, Nurul Ashykin Abd Aziz
Format: Conference or Workshop Item
Language:English
Published: 2014
Online Access:http://discol.umk.edu.my/id/eprint/9118/1/Conference%202.pdf
http://discol.umk.edu.my/id/eprint/9118/
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spelling my.umk.eprints.91182022-05-23T12:09:35Z http://discol.umk.edu.my/id/eprint/9118/ Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia Nur A’mirah Mohd Yaziz Mohd Rosli Mohamad Hasif Rafidee Hasbollah Nurul Ashykin Abd Aziz Inflation is one of the most substantial elements in the analysis of a country’s economy. It describes the general increment of the price of goods and services in a country. The interaction between inflation and economic growth are closely related. A high inflation rate would bring a negative impact on a country. Economists agreed that price stability is a prerequisite for a country’s rapid growth and important for a balanced development mechanism. Great economic decision can be made with a good forecasting values associated with low forecast errors. This research aimed to identify the best model in forecasting inflation using the Consumer Price Index (CPI) data as an indicator of inflation. Three models were considered based on univariate and multivariate time series. Models based on the fixed parameter and the time-varying parameter were also considered. The best model chosen is based on out-of-sample forecasting framework starting from January 2009 until December 2012, while the model was fitted for period January 1997 to December 2008. The starting point of comparison is Naive Model acting as benchmark while the other models, Autoregressive Distributed Lag (ADL), and Time-Varying Parameter (TVP) model were carried out. The results showed that, TVP Model outperformed all the other competed models. Thus, it is the best model to forecast inflation in Malaysia. 2014 Conference or Workshop Item NonPeerReviewed text en http://discol.umk.edu.my/id/eprint/9118/1/Conference%202.pdf Nur A’mirah Mohd Yaziz and Mohd Rosli Mohamad and Hasif Rafidee Hasbollah and Nurul Ashykin Abd Aziz (2014) Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia. In: 3rd International Seminar on Entrepreneurship and Business (ISEB 2014), 14 Disember 2014, Hotel Perdana, Kota Bharu, Kelantan.
institution Universiti Malaysia Kelantan
building Perpustakaan Universiti Malaysia Kelantan
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Kelantan
content_source UMK Institutional Repository
url_provider http://umkeprints.umk.edu.my/
language English
description Inflation is one of the most substantial elements in the analysis of a country’s economy. It describes the general increment of the price of goods and services in a country. The interaction between inflation and economic growth are closely related. A high inflation rate would bring a negative impact on a country. Economists agreed that price stability is a prerequisite for a country’s rapid growth and important for a balanced development mechanism. Great economic decision can be made with a good forecasting values associated with low forecast errors. This research aimed to identify the best model in forecasting inflation using the Consumer Price Index (CPI) data as an indicator of inflation. Three models were considered based on univariate and multivariate time series. Models based on the fixed parameter and the time-varying parameter were also considered. The best model chosen is based on out-of-sample forecasting framework starting from January 2009 until December 2012, while the model was fitted for period January 1997 to December 2008. The starting point of comparison is Naive Model acting as benchmark while the other models, Autoregressive Distributed Lag (ADL), and Time-Varying Parameter (TVP) model were carried out. The results showed that, TVP Model outperformed all the other competed models. Thus, it is the best model to forecast inflation in Malaysia.
format Conference or Workshop Item
author Nur A’mirah Mohd Yaziz
Mohd Rosli Mohamad
Hasif Rafidee Hasbollah
Nurul Ashykin Abd Aziz
spellingShingle Nur A’mirah Mohd Yaziz
Mohd Rosli Mohamad
Hasif Rafidee Hasbollah
Nurul Ashykin Abd Aziz
Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
author_facet Nur A’mirah Mohd Yaziz
Mohd Rosli Mohamad
Hasif Rafidee Hasbollah
Nurul Ashykin Abd Aziz
author_sort Nur A’mirah Mohd Yaziz
title Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
title_short Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
title_full Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
title_fullStr Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
title_full_unstemmed Comparing the fixed and the time varying parameter model in forecasting the inflation rate of Malaysia
title_sort comparing the fixed and the time varying parameter model in forecasting the inflation rate of malaysia
publishDate 2014
url http://discol.umk.edu.my/id/eprint/9118/1/Conference%202.pdf
http://discol.umk.edu.my/id/eprint/9118/
_version_ 1763304061733437440
score 13.211869

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