Compute the mean square prediction errors (MSPE) and compare the model performance with an average-of-last-12-months model.
Forecasting UK Inflation “Since Central Banks have abandoned the control of monetary aggregates and have implemented inflation targeting rules directly or indirectly, by means of aggressive Taylor rules, forecasting inflation rates has become crucial for both policy makers and private agents who try understand and react to Central Banks behaviour. Several methods have been proposed … Read more