Forecasting inflation in Malaysia
This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: comm...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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John Wiley & Sons
2010
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| Online Access: | http://psasir.upm.edu.my/id/eprint/14799/ http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf |
| _version_ | 1848842495612420096 |
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| author | Duasa, Jarita Ahmad, Nursilah Ibrahim, Mansor Zainal, Mohd Pisal |
| author_facet | Duasa, Jarita Ahmad, Nursilah Ibrahim, Mansor Zainal, Mohd Pisal |
| author_sort | Duasa, Jarita |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: commodity prices, financial indicators and economic activities. For each indicator, the forecasting horizon used is 24 months and the VECM model is applied for seven sample windows over sample periods starting with the first month of 1980 and ending with the 12th month of every 2 years from 1992 to 2004. The degree of independence of each indicator from inflation is tested by analyzing the variance decomposition of each indicator and Granger causality between each indicator and inflation. We propose that a simple model using an aggregation of indices improves the accuracy of inflation forecasts. The results support our hypothesis. |
| first_indexed | 2025-11-15T08:00:02Z |
| format | Article |
| id | upm-14799 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T08:00:02Z |
| publishDate | 2010 |
| publisher | John Wiley & Sons |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-147992019-04-10T01:48:50Z http://psasir.upm.edu.my/id/eprint/14799/ Forecasting inflation in Malaysia Duasa, Jarita Ahmad, Nursilah Ibrahim, Mansor Zainal, Mohd Pisal This paper aims to identify the best indicator in forecasting inflation in Malaysia. In methodology, the study constructs a simple forecasting model that incorporates the indicator/variable using the vector error correction (VECM) model of quasi‐tradable inflation index and selected indicators: commodity prices, financial indicators and economic activities. For each indicator, the forecasting horizon used is 24 months and the VECM model is applied for seven sample windows over sample periods starting with the first month of 1980 and ending with the 12th month of every 2 years from 1992 to 2004. The degree of independence of each indicator from inflation is tested by analyzing the variance decomposition of each indicator and Granger causality between each indicator and inflation. We propose that a simple model using an aggregation of indices improves the accuracy of inflation forecasts. The results support our hypothesis. John Wiley & Sons 2010-09 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf Duasa, Jarita and Ahmad, Nursilah and Ibrahim, Mansor and Zainal, Mohd Pisal (2010) Forecasting inflation in Malaysia. Journal of Forecasting, 29 (6). pp. 573-594. ISSN 0277-6693; ESSN: 1099-131X https://onlinelibrary.wiley.com/doi/abs/10.1002/for.1154 10.1002/for.1154 |
| spellingShingle | Duasa, Jarita Ahmad, Nursilah Ibrahim, Mansor Zainal, Mohd Pisal Forecasting inflation in Malaysia |
| title | Forecasting inflation in Malaysia |
| title_full | Forecasting inflation in Malaysia |
| title_fullStr | Forecasting inflation in Malaysia |
| title_full_unstemmed | Forecasting inflation in Malaysia |
| title_short | Forecasting inflation in Malaysia |
| title_sort | forecasting inflation in malaysia |
| url | http://psasir.upm.edu.my/id/eprint/14799/ http://psasir.upm.edu.my/id/eprint/14799/ http://psasir.upm.edu.my/id/eprint/14799/ http://psasir.upm.edu.my/id/eprint/14799/1/Forecasting%20inflation%20in%20Malaysia.pdf |