Summary This paper develops a factor model for forecasting inflation in the euro area. The model can handle variables with different timeliness, sample size and frequency. We show that the forecasts based on the factor model outperform naïve random walk forecasts, a hard to beat benchmark for...

This paper develops a factor model for forecasting inflation in the euro area. The model can handle variables with different timeliness, sample size and frequency. We show that the forecasts based on the factor model outperform nai¨ve random walk forecasts, a hard to beat benchmark for euro...