UNCERTAINTY AND DISAGREEMENT IN INFLATION FORECASTING

This paper tries to explain how the new adopted strategy of inflation targeting can help in improvement of inflation forecasting accuracy comparing with the price maker's and consumer's inflation expectations. For the further analysis authors use well known univariate time series models and structural models. However, the same model can produce the opposite results according to the methodology of involved inflation indicator. Therefore, this paper uses compared analysis for two separated inflation indicators, the core inflation and the consumer price index, emphasizing the differences in methodology and forecasting accuracy. Thus, the final goal is to test forecast efficiency by decreasing the errors between inflation expectations and real inflation values.