1. Forecasting challanges in emerging countries Zoltán Gyenes

2. Double system Modelling group ( 5 people) Experts group ( 15 people)
The role of the experts is at least as large as the modelling economists
WHY?

3. Short time series
Poor quality of the time series
Large and frequent shocks
Structural changes
Market liberalization
Still large share of the government
etc.

4. What do the experts do? Developed countries – short time forecast
Hungary – short and also long forecast
Stance evaluation: catching the underlying development
Short forecast: time series methods, conversation with managers of the market leader companies
Long forecast: partial models
Operate as a simultaneous system

5. Partial models - an example: the inflation forecasting model
Partial: several RHVs are exogenous
Desaggregated (129 item = 129 equation)
Driver: the change of the input costs and the markup
Correlation between levels
Modelling of the input cost pass-through is sophisticated
Bayes based approach

6. Thank you

7. Contribution of selected elements to the cpi

8. Range of different underlying inflation series (annualised monthly changes)