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Abstract
Inflation in India is commonly analyzed in terms of the traditional ‘monetarist’ and ‘structuralist’ frameworks. However, these models have not been widely tested for their forecasting ability in practical policy settings. Besides, the important issue of assessment of inflationary expectations is hardly addressed by these models. This paper illustrates an empirical method for high frequency (weekly) forecasting of inflation rate based on mixed estimation and Markov Chain Monte-Carlo led Gibbs sampling procedure and compares the outcomes with respect to those obtained from an analogue classical least squares (CLS) model. Improvement in forecasting performance is observed.
Acknowledgements
The author would like to express his gratitude to an anonymous referee for valuable comments/suggestions.