Abstract
This paper compares and evaluates the inflation forecasts in Taiwan from the Directorate General of Budget, Accounting and Statistics, Executive Yuan (DGBAS), Institute of Economics, Academia Sinica (IEAS), Taiwan Institute of Economic Research (TIER), and Chung-Hua Institution for Economic Research (CIER). We examine whether their forecasts satisfy the Rational Expectation Hypothesis (REH). Moreover, we compare the forecasting accuracy among these institutions and investigate whether the forecasts from these institutions would interact with each other. We find that most of the inflation forecasts from these institutions do not satisfy the Weak and Strong Rationality Condition of REH. We also find that the IEAS’s forecasts are the most accurate among all the institutions investigated. Moreover, we find that the inflation forecasts from IEAS and TIER are Granger caused by DGBAS’s forecasts while the inflation forecasts from DGBAS are Granger caused by CIER’s forecasts. Finally, by using Fair and Shiller (1990)’s test, we find that DGBAS’s inflation forecasts contain more information than the forecasts from other institutions.