Forecasting challanges in emerging countries

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• Forecasting challanges in emerging countries
• Zoltán Gyenes

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• Double system
• Modelling group ( 5 people)
• Experts group ( 15 people)
• The role of the experts is at least as large as
  the modelling economists
• WHY?

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• Short time series
• Poor quality of the time series
• Large and frequent shocks
• Structural changes
• Market liberalization
• Still large share of the government
• etc.

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What do the experts do?

• Developed countries short time forecast
• Hungary short and also long forecast
• Stance evaluation catching the underlying
  development
• Short forecast time series methods, conversation
  with managers of the market leader companies
• Long forecast partial models
• Operate as a simultaneous system

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Partial models- an example the inflation
forecasting model

• Partial several RHVs are exogenous
• Desaggregated (129 item 129 equation)
• Driver the change of the input costs and the
  markup
• Correlation between levels
• Modelling of the input cost pass-through is
  sophisticated
• Bayes based approach

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• Thank you

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Contribution of selected elements to the cpi
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Range of different underlying inflation
series(annualised monthly changes)