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Enhancing Forecasting in Emerging Markets: Expert Role in Economic Modelling

Explore the challenges and strategies of economic forecasting in emerging countries, highlighting the crucial role of experts in navigating short time series, market shocks, and structural changes to develop accurate predictions. Learn how experts evaluate, model, and forecast in both short and long terms, with a focus on inflation forecasting models and operational dynamics.

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Enhancing Forecasting in Emerging Markets: Expert Role in Economic Modelling

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  1. Forecasting challanges in emerging countries Zoltán Gyenes

  2. Double system • Modelling group ( 5 people) • Experts group ( 15 people) • The role of the experts is at least as large as the modelling economists WHY?

  3. Short time series • Poor quality of the time series • Large and frequent shocks • Structural changes • Market liberalization • Still large share of the government • etc.

  4. What do the experts do? Developed countries – short time forecast Hungary – short and also long forecast • Stance evaluation: catching the underlying development • Short forecast: time series methods, conversation with managers of the market leader companies • Long forecast: partial models • Operate as a simultaneous system

  5. Partial models- an example: the inflation forecasting model • Partial: several RHVs are exogenous • Desaggregated (129 item = 129 equation) • Driver: the change of the input costs and the markup • Correlation between levels • Modelling of the input cost pass-through is sophisticated • Bayes based approach

  6. Thank you

  7. Contribution of selected elements to the cpi

  8. Range of different underlying inflation series(annualised monthly changes)

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