Indeed, the most salient feature of today’s inflation is its ubiquity. In the absence of global policy options to resolve supply-chain disruptions, the task of addressing inflation is left to the major central banks.
Gencer used an elastic net model with time-series data to predict the inflation rate in Turkey. Elastic nets are preferred over generalised linear models, random forests and support vector machines because of their ability to handle collinearity, create an interpretable model and (of course) better prediction performance—the sweet spot of interpretability, performance and speed.
The most powerful determinant of inflation is CPI, followed by annual changes in import prices, which are followed by inflation expectations. It all hints at how inflation creates a self-sustaining loop.
