The paper presents forecasts of headline and core inflation in Estonia with factor models in a recursive pseudo out-of-sample framework. The factors are constructed with a principal component analysis and are then incorporated into vector autoregressive (VAR) forecasting models. The analyses...

Purpose This paper aims to complement to standard Basel countercyclical capital buffer framework by suggesting additional measures for credit gaps that can be used to measure the financial cycle and to decide on countercyclical capital buffers for banks. Design/methodology/approach The paper...