Integration of GSTAR-X and Uniform location weights methods for forecasting Inflation Survey of Living Costs in Central Java

Abstract

Inflation is a tendency to increase prices of goods and services that take place continuously. Inflation is a monthly time series data that is thought to be influenced by location elements. Modeling for inflation forecasting that involves time and location (spatio temporal) can use the Generalized Space Time Autoregressive (GSTAR) method. To increase accuracy in modeling and forecasting, the GSTAR model was developed into the GSTARX model by involving exogenous variables. Exogenous Variavel used in GSTARX modeling for forecasting Inflation is a variation of the Eid calendar. This GSTARX modeling is applied for inflation forecasting in six cities Cost of Living Survey (SBH) in Central Java, namely Cilacap, Purwokerto, Semarang, Kudus, Magelang and Surakarta. The purpose of this study is to get the best GSTARX model for inflation forecasting for six SBH cities in Central Java. The selection of the best model from the GSTARX method is seen with the smallest RMSE value of each model. Obtained that the GSTARX model with uniform weights is the best model because it has a smaller RMSE compared to the GSTARX model with inverse distance weights, the RMSE values are 0.6122 and 0.6137, respectively. It can be concluded that the GSTARX method with Uniform weighting can provide better performance and can be used to predict the inflation of the six SBH cities in Central Java in the next 12 periods.