A Disaggregate Model and Second Round Effects for the CPI Inflation in Costa Rica

Leon, Jorge (2012): A Disaggregate Model and Second Round Effects for the CPI Inflation in Costa Rica.

Abstract

This paper estimates a medium-term forecasting model for the headline inflation of Costa Rica, utilizing disaggregate data from the components of the Consumer Price Index (CPI). The period used for the estimation is characterize by a process of reduction of inflation and stabilized around the Central Bank's inflation target. The result show that the use of disaggregate data is at least as good as the aggregate data in forecast accuracy. The disaggregate model allows to differentiate the inertia and the Second-Round effects present on the inflation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation, Forecast, CPI, PPI, Second Round Effect.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

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