Nonlinear models struggle to outperform VARs, Azerbaijani paper finds

Models can still be useful for producing inflation probability distributions

national-bank-azerbaijan
The Central Bank of Azerbaijan recently published its first working paper

Nonlinear forecasting models perform poorly against models based on autoregressive and vector autoregressive (VAR) measures, according to a working paper published in April by the Central Bank of Azerbaijan.

Forecasting inflation in post-oil boom years: a case for non-linear models? by Vugar Ahmadov, Shaig Adigozalov, Salman Huseynov, Fuad Mammadov and Vugar Rahimov is the first in a new working paper series published by the central bank.

The authors test various nonlinear models, including

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