Forecasting inflation with online prices

Are survey-based forecasts unbeatable? They are not. This paper uses online price indices to forecast the Consumer Price Index. We find that online price indices anticipate changes in official inflation trends more than one month in advance. Our baseline one-month forecast outperforms Bloomberg surv...

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Bibliographic Details
Published in:	International journal of forecasting Vol. 36; no. 2; pp. 232 - 247
Main Authors:	Aparicio, Diego, Bertolotto, Manuel I.
Format:	Journal Article
Language:	English
Published:	Elsevier B.V 01-04-2020
Subjects:	High frequency Inflation forecasting Monthly forecast Online prices Quarterly forecast Survey of professional forecast Quarterly forecast Online prices High frequency Monthly forecast Inflation forecasting Survey of professional forecast
Online Access:	Get full text
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Summary:	Are survey-based forecasts unbeatable? They are not. This paper uses online price indices to forecast the Consumer Price Index. We find that online price indices anticipate changes in official inflation trends more than one month in advance. Our baseline one-month forecast outperforms Bloomberg surveys of forecasters, which only predict the contemporaneous inflation rate. Our baseline specification also outperforms statistical benchmark forecasts for Australia, Canada, France, Germany, Greece, Ireland, Italy, the Netherlands, the United Kingdom, and the United States. Similarly, our quarterly forecast for the US inflation rate substantially outperforms the Survey of Professional Forecasters.
ISSN:	0169-2070 1872-8200
DOI:	10.1016/j.ijforecast.2019.04.018