Description

Several years ago, the entire world experienced how fast and damaging certain inflationary shocks can be transmitted across seemingly uncorrelated countries. Despite the analysis of fuzzy transmission mechanisms, a direct inflationary transmission channel through global comm odity prices shocks has been always of interest to policymakers — especially those concerned on imported inflation. The majority of international - to - domestic pass - through price measures are obviously in - sample estimations. However, in this article I analyse to what extent either global inflation or the Brent oil price provides more valuable information for future domestic inflation rates. I compare ten different multihorizon forecasts coming from a family of univariate time - series models for 53 countries. Eac h of these ten models is augmented with an exogenous variable — either and ad - hoc global inflation factor or Brent oil price. Overall, in almost 90% of the countries the use of any of these two variables improves the forecasting accuracy compared to the case without any exogenous factor. In 74 and 60% of the countries the global - inflation - based forecast outperforms oil - based forecast at 1 - and 12 - months - ahead. Twenty - four - months ahead the oil - based - forecast outperforms in 62% of the countries. Major predictiv e gains are observed for European OECD and Caribbean countries.