tag:blogger.com,1999:blog-5908830827135060852.post1767146892842296818..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Primer: Seasonally Adjusting An Inflation ForecastBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5908830827135060852.post-66784421607735814832018-08-09T10:53:24.585-04:002018-08-09T10:53:24.585-04:00The top down macro models that many academics want...The top down macro models that many academics want to build are pretty disappointing. I think those style of models may have worked in the 1970s, when you had a lot of cyclical inflationary pressure from things like indexed wage contracts. <br /><br />In the post-1990 world, core inflation tends to revert to 2% or so; just using that as a “model” outperforms a lot of other proposed top down models.<br /><br />But on a short horizon, I believe that you can model CPI on a component-by-component basis. Each component might have a different model structure. Doing that consistently is a full time job, but that’s what people are paid to do in the inflation-linked market. The forecast horizon is typically not long (under a year), but that’s good enough for a lot of relative value work. Since it’s easiest to build those models on a seasonally-adjusted basis, you need to reimpose seasonality, as seasonality matters a lot for shorted-dated carry.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-16117823116119138432018-08-09T10:10:34.378-04:002018-08-09T10:10:34.378-04:00How useful did you find time series regression for...How useful did you find time series regression forecasts in practice for finance/economics? I always thought it was a very fancy way of disappointing yourself. Anonymousnoreply@blogger.com