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Forecasting inflation in Malaysia

This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: comm...

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Main Authors: Duasa, Jarita, Ahmad, Nursilah, Ibrahim, Mansor, Zainal, Mohd Pisal
Format: Article
Language:English
Published: John Wiley & Sons 2010
Online Access:http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf
http://psasir.upm.edu.my/id/eprint/14799/
https://onlinelibrary.wiley.com/doi/abs/10.1002/for.1154
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spelling my.upm.eprints.147992019-04-10T01:48:50Z http://psasir.upm.edu.my/id/eprint/14799/ Forecasting inflation in Malaysia Duasa, Jarita Ahmad, Nursilah Ibrahim, Mansor Zainal, Mohd Pisal This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: commodity prices, financial indicators and economic activities. For each indicator, the forecasting horizon used is 24 months and the VECM model is applied for seven sample windows over sample periods starting with the first month of 1980 and ending with the 12th month of every 2 years from 1992 to 2004. The degree of independence of each indicator from inflation is tested by analyzing the variance decomposition of each indicator and Granger causality between each indicator and inflation. We propose that a simple model using an aggregation of indices improves the accuracy of inflation forecasts. The results support our hypothesis. John Wiley & Sons 2010-09 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf Duasa, Jarita and Ahmad, Nursilah and Ibrahim, Mansor and Zainal, Mohd Pisal (2010) Forecasting inflation in Malaysia. Journal of Forecasting, 29 (6). pp. 573-594. ISSN 0277-6693; ESSN: 1099-131X https://onlinelibrary.wiley.com/doi/abs/10.1002/for.1154 10.1002/for.1154
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: commodity prices, financial indicators and economic activities. For each indicator, the forecasting horizon used is 24 months and the VECM model is applied for seven sample windows over sample periods starting with the first month of 1980 and ending with the 12th month of every 2 years from 1992 to 2004. The degree of independence of each indicator from inflation is tested by analyzing the variance decomposition of each indicator and Granger causality between each indicator and inflation. We propose that a simple model using an aggregation of indices improves the accuracy of inflation forecasts. The results support our hypothesis.
format Article
author Duasa, Jarita
Ahmad, Nursilah
Ibrahim, Mansor
Zainal, Mohd Pisal
spellingShingle Duasa, Jarita
Ahmad, Nursilah
Ibrahim, Mansor
Zainal, Mohd Pisal
Forecasting inflation in Malaysia
author_facet Duasa, Jarita
Ahmad, Nursilah
Ibrahim, Mansor
Zainal, Mohd Pisal
author_sort Duasa, Jarita
title Forecasting inflation in Malaysia
title_short Forecasting inflation in Malaysia
title_full Forecasting inflation in Malaysia
title_fullStr Forecasting inflation in Malaysia
title_full_unstemmed Forecasting inflation in Malaysia
title_sort forecasting inflation in malaysia
publisher John Wiley & Sons
publishDate 2010
url http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf
http://psasir.upm.edu.my/id/eprint/14799/
https://onlinelibrary.wiley.com/doi/abs/10.1002/for.1154
_version_ 1643825742775058432
score 13.211869

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