Distributions allow better state-level forecasts – RBI paper
Authors find new method incorporating inflation and expectations can cut forecast errors
Using the full distribution of inflation expectations at the state level can improve forecasting performance, research published by the Reserve Bank of India finds.
In the working paper, published on December 31, Purnima Shaw and RK Sinha employ a technique developed by Sinha in a previous paper. Rather than using a straightforward regression, they map out the full probability distributions of inflation and inflation expectations at the state level, and use these to produce forecasts. Sinha had
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