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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:A stochastic estimation framework for components of the South African consumer price index
Authors:Aron, JanineISNI
Muellbauer, John N.J.ISNI
Pretorius, Coen
Year:2009
Periodical:South African Journal of Economics
Volume:77
Issue:2
Pages:282-313
Language:English
Geographic term:South Africa
Subjects:inflation
consumer prices
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2009.01214.x/pdf
Abstract:Under inflation targeting in South Africa, it is important to monitor and forecast changes in prices, not only for aggregate measures of the consumer price index, but also its underlying subcomponents. Hypotheses about sectoral transmission of policy and shocks are often more specific than hypotheses about overall transmission. This study employs a stochastic framework to estimate richly specified equilibrium correction models, four-quarters-ahead, for the 10 subcomponents of the first targeted measure of the consumer price index, CPIX. The stochastic trends are estimated by the Kalman filter, and interpreted as capturing structural breaks and institutional change, a frequent cause of forecast failure. The trends suggest the design of deterministic split trends for use in recursive forecasting models, towards more accurate overall inflation forecasting. This research also has practical use for monetary policy in allowing identification of sectoral sources of inflation. Bibliogr., notes, ref., sum. [Journal abstract]
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