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Modeling and Forecasting Inflation in Japan

Author/Editor: Sekine, Toshitaka
Authorized for Distribution: June 1, 2001
Electronic Access: Free Full Text (PDF file size is 1,120KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper estimates an inflation function and forecasts one-year ahead inflation for Japan. It finds that (i) markup relationships, excess money and the output gap are particularly relevant long-run determinants for an equilibrium correction model (EqCM) of inflation; (ii) with intercept corrections, one-year ahead inflation forecast performance of the EqCM is good; and (iii) forecast accuracy can be improved by combining forecasts of the EqCM with those made by rival models. The EqCM obtained would serve for structural model-based inflation forecasting. It also highlights the importance of adjustment to a pure model-based forecast by utilizing information of alternative models. The methodology employed is applicable to a wider range of countries including some emerging market economies.
 
Series: Working Paper No. 01/82
Subject(s): Inflation | Japan | Economic forecasting | Forecasting models
Author's keyword(s): inflation | forecast | Japan
 
English  
    Published:   June 1, 2001        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0822001   Pages:   35
    Price:   US$15.00
       
     
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