Evaluation of Information Content of Economic Variables for Inflation Forecasting in Iran

An effective monetray policy requires forecasting inflation accurately. In this paper, we examine the information content of a broad range of variables for forecasting inflation over the period 1377-1387. The results show that, in general, the variables belonging to the price indices group have the most information content. But when forecasting inflation in real time, the variables belonging to the national accounts group have the best performance. And, in the medium run forecast horizon (three to four quarters ahead), M1 and M2 perform the best.