Long memory,economic policy uncertainty and forecasting US inflation: a Bayesian VARFIMA approach |
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| Authors: | Mehmet Balcilar Charl Jooste |
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| Affiliation: | 1. Department of Economics, Eastern Mediterranean University, Famagusta, Turkey;2. Department of Economics, University of Pretoria, Pretoria, South Africa;3. Department of Economics, University of Pretoria, Pretoria, South Africa |
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| Abstract: | We compare inflation forecasts of a vector autoregressive fractionally integrated moving average (VARFIMA) model against standard forecasting models. U.S. inflation forecasts improve when controlling for persistence and economic policy uncertainty (EPU). Importantly, the VARFIMA model, comprising of inflation and EPU, outperforms commonly used inflation forecast models. |
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| Keywords: | Inflation long-range dependency economic policy uncertainty |
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