Density forecasts of inflation: A quantile regression forest approach

Arbeitspapier

Density forecasts of euro area inflation are a fundamental input for a medium-term oriented central bank, such as the European Central Bank (ECB). We show that a quantile regression forest, capturing a general non-linear relationship between euro area (headline and core) inflation and a large set of determinants, is competitive with state-of-the-art linear benchmarks and judgemental survey forecasts. The median forecasts of the quantile regression forest are very collinear with the ECB point inflation forecasts, displaying similar deviations from "linearity". Given that the ECB modelling toolbox is overwhelmingly linear, this finding suggests that the expert judgement embedded in the ECB forecast may be characterized by some mild non-linearity.

Object Details

• ISBN: 978-92-899-6115-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2830

Classification and Topics

• Classification: Wirtschaft ; Model Evaluation, Validation, and Selection ; Forecasting Models; Simulation Methods ; Price Level; Inflation; Deflation ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: Inflation ; Non-linearity ; Quantile Regression Forest

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lenza, Michele ; Moutachaker, Inès ; Paredes, Joan
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• DOI: doi:10.2866/360772
• Handle: http://hdl.handle.net/10419/278662
• Last update: 10.03.2025, 11:42 AM CET