https://doi.org/10.52903/wp2026363
SHORT-TERM INFLATION PROJECTIONS: THE NEW BOG’STIP MODEL
Zacharias Bragoudakis
Bank of Greece
Alexandros Karakitsios
Bank of Greece
Evangelia Kasimati
Bank of Greece
ABSTRACT
This paper outlines the operational framework of the new Short-Term Inflation Projections model for the Greek economy - BoG’STIP model (hereafter) currently employed by the Bank of Greece within the context of the Eurosystem’s inflation projection exercises. The new BoG’STIP model is designed to produce monthly projections for the Greek inflation over a 36-month horizon, providing a critical input for monetary policy decisions. It consists of a set of short-term dynamic equations for the Harmonised Index of Consumer Prices (HICP) and its main components, estimated with emphasis on both the statistical fit and the economic plausibility of the estimated coefficients. Using a pseudo real-time forecasting setup, the model is estimated over the period 1995–2021 and generates projections for 2022–2024. The findings indicate that BoG’STIP model outperforms benchmark models such as AR and ARIMA across most HICP components, except for energy, confirming its robustness and practical value despite certain limitations. The model also exhibits strong forecasting performance for headline inflation, particularly at the 12-month horizon, and effectively captures broader inflationary trends even over longer horizons (up to 36 months). The paper contributes both operationally, by documenting a projection framework compatible with the Broadly Eurosystem Macroeconomics Projections Exercise ((B)MPE) and the Eurosystem Narrow Inflation Projections Exercise (NIPE) and empirically, by providing a transparent and policy-ready inflation forecasting tool tailored to the Greek economy.
Keywords: BMPE, Greek economy, Inflation forecasting, NIPE, STIP model
JEL-classifications: C32; C51; C52; C53; E31
Acknowledgements: The authors would like to thank the participants of the 2025 NIPE workshop for the fruitful exchange of views and their valuable comments. We also gratefully acknowledge the insightful feedback provided by H. Balfoussia and an anonymous referee, which significantly improved the quality of the paper. The views expressed in this article are of the authors and do not necessarily reflect those of the Bank of Greece. The authors are responsible for any errors or omissions.
Correspondence:
Zacharias Bragoudakis
Economic Analysis and Research Department
Bank of Greece
El. Venizelos 21, 10250 Athens, Greece
Tel.: +30-2103203605
email: zbragoudakis@bankofgreece.gr