https://doi.org/10.52903/wp2025350
A NEW PROPOSAL FOR FORECASTING INFLATION IN THE EUROZONE. A GLOBAL MODEL
Georgios Angelopoulos
Department of Accounting and Finance, University of West Attica and Bank of Greece
Zacharias Bragoudakis
Bank of Greece
Dimitrios Dimitriou
Department of Accounting and Finance, University of West Attica
Alexandros Tsioutsios
Department of Economics and UoA Center for Financial Studies, School of Economics and Political Sciences, National and Kapodistrian University of Athens
ABSTRACT
This paper evaluates the forecasting performance of the relatively new machine learning Global Unrefined (GlobalUN, hereafter) model with respect to inflation in the Eurozone. In this global pooled neural network framework, we use a quarterly panel dataset covering 20 euro-area countries (2001Q1–2025Q1) together with the EA-20 aggregate, which includes key variables such as HICP, energy prices, food, and others. Thus, the network remains simple yet flexible enough to absorb heterogeneity across countries. Our contribution of our work is crucial since monetary policy in the Eurozone hinges on accurate inflation forecasts (i.e., as ECB decisions target expected rather than current inflation). Our findings are crystal clear. The GlobalUN model outperforms all other benchmark models and the advanced machine learning XGBoost model in almost all Eurozone countries and horizons (i.e., the NAÏVE model seems to outperform in a few cases). These results are useful for policymakers, central banks, and fiscal institutions, as they should take the GlobalUN model into account as part of their arsenal.
Keywords: GlobalUN model, forecasting evaluation, inflation, Eurozone, Banking
JEL-classifications: E31, E52, E58, C53
Disclaimer: The views expressed in this paper are those of the authors and not necessarily those of either the Bank of Greece or the Eurosystem.
Corresponding author:
Zacharias Bragoudakis
Economic Analysis and Research Department
Bank of Greece
El.Venizelos 21, 10250 Athens, Greece
Tel.:+30-2103203605
email: zbragoudakis@bankofgreece.gr