Series: Occasional Papers. 1703.
Author: Luis J. Álvarez and Isabel Sánchez.
Published in: Journal of Policy Modeling Volume 41, Issue 4, July-August 2019, Pages 568-585
As “Inflation projections for monetary policy decision making”
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Abstract
This paper describes the econometric models used by the Banco de España to monitor consumer price inflation and forecast its future trends. The strategy followed heavily relies on the results from a set of econometric models, supplemented by expert judgment. We consider three different types of approaches and highlight the relevance of heterogeneity in price-setting behaviour and the importance of using models that allow for a slowly evolving local mean when forecasting inflation.