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Forecasting inflation for transition countries: How accurate are the EBRD forecasts?
This paper analyses the statistical properties of annual inflation forecasts
prepared by the EBRD for 25 transition countries between 1994 and 2005. The
empirical results show that EBRD forecasts are mostly unbiased. Late
within-year forecasts are also found to be efficient. Forecast accuracy is
shown to be related to four main factors: timely availability of monthly data,
decline in price volatility over time, general progress in transition reforms,
and exchange rate developments. The late within-year forecasts of the EBRD
were found to be on average better by 2.5 percentage points compared with
other institutions but no better than forecasts based on a formal ARIMA
inflation model.
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