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Core Inflation Rate for China and the ASEAN-10 Countries: Smoothed Signal for Score-Driven Local Level Plus Scale Models

Author

Listed:
  • Blazsek Szabolcs

    (School of Business, Universidad Francisco Marroquín, Guatemala City, 01010, Guatemala)

  • Licht Adrian

    (School of Business, Universidad Francisco Marroquín, Guatemala City, 01010, Guatemala)

  • Ayala Astrid

    (School of Business, Universidad Francisco Marroquín, Guatemala City, 01010, Guatemala)

  • Liu Su-Ping

    (College of Business and Public Management, Wenzhou-Kean University, 88 Daxue Rd, Ouhai, Wenzhou, 325060, Zhejiang Province, China)

Abstract

We use a score-driven minimum mean-squared error (MSE) signal extraction method and perform inflation smoothing for China and the ASEAN-10 countries. Our focus on China and ASEAN-10 countries is motivated by the significant historical variation in inflation rates, e.g. during the 1997 Asian Financial Crisis, the 2007–2008 Financial Crisis, the COVID-19 Pandemic, and the Russian Invasion of Ukraine. Some advantages of the score-driven signal extraction method are that it uses dynamic mean and volatility filters, it considers stationary or non-stationary mean dynamics, it is computationally fast, it is robust to extreme observations, it uses information-theoretically optimal updating mechanisms for both mean and volatility, it uses closed-form formulas for smoothed signals, and parameters are estimated by using the maximum likelihood (ML) method for which the asymptotic properties of estimates are known. In the empirical application, we present the political and economic conditions for each country and analyze the evolution and determinants of the core inflation rate.

Suggested Citation

  • Blazsek Szabolcs & Licht Adrian & Ayala Astrid & Liu Su-Ping, 2025. "Core Inflation Rate for China and the ASEAN-10 Countries: Smoothed Signal for Score-Driven Local Level Plus Scale Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 29(2), pages 177-212.
    • Handle: RePEc:bpj:sndecm:v:29:y:2025:i:2:p:177-212:n:1006
    DOI: 10.1515/snde-2023-0042
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    More about this item

    Keywords

    core inflation rate; minimum mean-squared error (MSE) signal extraction; generalized autoregressive score (GAS); dynamic conditional score (DCS); monetary policy;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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