A1296
Title: Density forecasts of inflation: A quantile regression forest approach
Authors: Michele Lenza - European Central Bank (Germany) [presenting]
Ines Moutachaker - INSEE (France)
Joan Paredes - European Central Bank (Germany)
Abstract: Density forecasts of euro area inflation are a fundamental input for a medium-term oriented central bank, such as the European Central Bank (ECB). A quantile regression forecast is presented, capturing a general non-linear relationship between euro area (headline and core) inflation and a large set of determinants. The regression is competitive with state-of-the-art linear benchmarks and judgmental survey forecasts. The median forecasts of the quantile regression forecast are collinear with the ECB point inflation forecasts, displaying similar deviations from "linearity". Given that the ECB modelling toolbox is overwhelmingly linear, this finding suggests that mild non-linearity may characterize the expert judgment embedded in the ECB forecast.
