Forecasting Venezuela Hyperinflation

Forecasting economic variables, in general, is always a complicated exercise. Since we are not able to predict the future behavior of policymakers, the best we can do is to forecast based on the past and current information available.
Forecasting hyperinflation is even more complicated, since the variations are very sensitive. In the following Figure can be seen the forecast for Venezuela monthly inflation between December 2018 and December 2019. I use a very conventional but powerful autoregressive model with 1, 3 and 6 lags. The AR(1) forecast for December 2018 is 147%, while the AR(3) and (6) are 174% and 186%.
Since the goal of forecasting is to minimize the error respect to the actual value, the AR(1) was the best model in the case of November 2018. However, the ability to predict of these models is  more effective 1 or 2 periods ahead but less effective when the period ahead is large.
Despite of this lack of ability to predict, with the AR(1) we can expect an inflation of 1.7 million % in 2018 and 5.2 million % in 2019, while the AR(3) and (6) forecast 1,9 million% and 2,0 million % in 2018 and 10.7 million % and 10.8 million % in 2019.
In this sense, based on the information available, we can forecast an inflation  around 1.9 million % in 2018 and 10.7 million % in 2019.
Unless there is an effective change of the monetary and fiscal policy and, in general, of the economic policy and political expectations, Venezuelan economy will remain under hyperinflation pressures.
Venezuela: Inflation Forecast