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Tracking Chinese CPI inflation in real time

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  • Mehrotra, Aaron

    ()
    (BOFIT)

  • Funke, Michael

    (BOFIT)

  • Yu, Hao

    (BOFIT)

Abstract

With recovery from the global financial crisis in 2009 and 2010, inflation emerged as a major concern for many central banks in emerging Asia. We use data observed at mixed frequencies to estimate the movement of Chinese headline inflation within the framework of a state-space model, and then take the estimated indicator to nowcast Chinese CPI inflation. The importance of forward-looking and high-frequency variables in tracking inflation dynamics is highlighted and the policy implications discussed.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 35/2011.

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Length: 35 pages
Date of creation: 22 Dec 2011
Date of revision:
Handle: RePEc:hhs:bofitp:2011_035

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Keywords: nowcasting; CPI inflation cycle; mixed-frequency modelling; dynamic factor model; China;

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References

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  1. Durbin, James & Koopman, Siem Jan, 2001. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, number 9780198523543.
  2. Mehrotra, Aaron & Funke, Michael & Yu, Hao, 2011. "Tracking Chinese CPI inflation in real time," BOFIT Discussion Papers 35/2011, Bank of Finland, Institute for Economies in Transition.
  3. Vladimir Kuzin & Massimiliano Marcellino & Christian Schumacher, 2009. "MIDAS vs. mixed-frequency VAR: Nowcasting GDP in the Euro Area," Economics Working Papers ECO2009/32, European University Institute.
  4. George Kapetanios, 2002. "Modelling Core Inflation for the UK Using a New Dynamic Factor Estimation Method and a Large Disaggregated Price Index Dataset," Working Papers 471, Queen Mary, University of London, School of Economics and Finance.
  5. Modugno, Michele, 2011. "Nowcasting inflation using high frequency data," Working Paper Series 1324, European Central Bank.
  6. Libero Monteforte & Gianluca Moretti, 2010. "Real time forecasts of inflation: the role of financial variables," Temi di discussione (Economic working papers) 767, Bank of Italy, Economic Research and International Relations Area.
  7. Andrew Filardo & Hans Genberg, 2010. "Targeting inflation in Asia and the Pacific: lessons from the recent past," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 251-273 Bank for International Settlements.
  8. Todd E. Clark & Michael W. McCracken, 2000. "Tests of Equal Forecast Accuracy and Encompassing for Nested Models," Econometric Society World Congress 2000 Contributed Papers 0319, Econometric Society.
  9. Bańbura, Marta & Modugno, Michele, 2010. "Maximum likelihood estimation of factor models on data sets with arbitrary pattern of missing data," Working Paper Series 1189, European Central Bank.
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Cited by:
  1. Minghong Tan, 2014. "The Transition of Farmland Production Functions in Metropolitan Areas in China," Sustainability, MDPI, Open Access Journal, vol. 6(7), pages 4028-4041, June.
  2. Michael Funke & Hao Yu & Aaron Mehrota, 2011. "Tracking Chinese CPI inflation in real time," Quantitative Macroeconomics Working Papers 21112, Hamburg University, Department of Economics.

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