Forecasting the South African Inflation Rate: On Asymmetric Loss and Forecast Rationality
Stellenbosch Working Paper Series No. WP26/2014Publication date: 2014
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Pretoria)
Using forecasts of the inflation rate in South Africa, we study the rationality of forecasts and the shape of forecasters’ loss function. When we study micro-level data of individual forecasts, we find mixed evidence of an asymmetric loss function, suggesting that inflation forecasters are heterogeneous with respect to the shape of their loss function. We also find strong evidence that inflation forecasts are in line with forecast rationality. When we pool the data, and study sectoral inflation forecasts of financial analysts, trade unions, and the business sector, we find evidence for asymmetry in the loss function, and against forecast rationality. Upon comparing the micro-level results with those for pooled and sectoral data, we conclude that forecast rationality should be assessed based on micro-level data, and that freer access to this data would allow more rigorous analysis and discussion of the information content of the surveys.
JEL Classification:C53, D82, E37
Keywords:inflation rate, forecasting, loss function, rationality
Notes:Published as: Christian Pierdzioch, Monique B. Reid & Rangan Gupta (2017), On the
directional accuracy of inflation forecasts: evidence from South
African survey data, Journal of Applied Statistics, DOI:
10.1080/02664763.2017.1322556
Link: http://www.tandfonline.com/doi/full/10.1080/02664763.2017.1322556
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Upcoming Seminars
Monday 28 July 202512:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
Topic: "TBC"
12:00-13:00
Prof Willem Boshoff
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
12:00-13:00
Prof Derek Yu: University Of The Western Cape
Topic: "Examining the teaching, assessment and research activities of the South African Economics Departments"
BER Weekly
6 Jun 2025 SA GDP barely expands in Q1, while BCI and PMI suggest that Q2 remained weakIt was a busy week for local data releases, much of which painted a bleak picture of SA’s economy. Not only was first-quarter GDP growth dismal, but 2024 growth was also revised lower to just 0.5%. , The RMB/BER Business Confidence Index (BCI) showed sentiment remained shaky in the second quarter...
Read the full issue