Development of the near-term forecast of inflation for Uzbekistan application of FAVAR and BVAR models

Development of the near-term forecast of inflation for Uzbekistan application of FAVAR and BVAR models

This study investigates the application of Factor-Augmented Vector Autoregression (FAVAR) and Bayesian Vector Autoregression (BVAR) models for inflation forecasting. FAVAR models deal with high-dimensional data by extracting latent factors from extensive macroeconomic indicators, while BVAR models incorporate prior distributions to enhance forecast stability and precision in data-limited environments. Employing a comprehensive dataset of Uzbekis…