The research area that I
would like to focus on is developing a new inflation forecasting
model for the Kyrgyz Republic, which will allow make projection for the medium
term (one to three years).
The Ministry of Economy of
the Kyrgyz Republic, as of 2018, has had experience in inflation forecasting;
however, the currently used models have limitation and gap, which the new
forecasting model will fill. Forecasting is about predicting the future
as accurately as possible, given all the in- formation available, including
historical data and knowledge of any future events that might impact the
forecasts. My goal is to predict
future values of inflation devoting more attention to find realistic values.
Recent studies, such as
those by Raftery, Karny & Ettler, (2010), McCormick, Raftery, Madigan & Burd (2013), suggest relying on Dynamic
Model Averaging (DMA) and a dynamic extension of Bayesian Model Averaging (BMA).
It is common practice to
compare two or three potential competing forecasting models. Each model is
itself an artificial construct that is based on a set of assumptions (explicit
and implicit) and usually involves one or more parameters which have to be estimated.
The Kyrgyz Republic is a ‘price-taker’ country, and moreover
is an open small economy, and therefore commodity price shocks, foreign
interest rate, global economic activity shocks are important and will play a
major role in forecasting exercises. Reasonable and predictable degree of prices is a key drivers
This model would greatly
assist the Ministry in the improvement of inflation forecasting and analyzing.
A new forecasting framework will provide historical decomposition: estimating
shocks, forecasting and analysis policies.
The study will use quarterly
data from the publications published by the National Statistical Committee of
the Kyrgyz Republic such as “Social economic situation,” “National accounts of
the Kyrgyz Republic,” “Consumer price indices for goods” and Bulletin of the
National Bank of the Kyrgyz Republic. The above mentioned monthly data will be
obtained from 1995 to 2017.
The process of economic forecasting is one of the key
tools of macroeconomic management. Improvements
in macroeconomic forecasting usually enhance long-term economic development, therefore,
the expected results from this research is a new inflation forecasting tool for
the government of the Kyrgyz Republic.