Thursday 22 May 2008

Forecasting Inflation in China

Inflation in China is something of a hot topic to the extent that the blog and newspaper coverage of this topic is seemingly endless. China Financial Markets for example has long detailed posts on inflation and its cures and consequences daily.

This academic paper from the Bank of Finland is either very timely or completely out of date already. I find it hard to believe the forecasts from a month or two ago can be in any way accurate even a few months later.

The methodology may be of more interest.

Judge for yourself.

----------------------------------------

Forecasting Inflation in China

AARON N. MEHROTRA
Bank of Finland - Institute for Economies in Transition (BOFIT); European University Institute - Economics Department (ECO)
JOSÉ R. SÁNCHEZ-FUNG
Kingston University January 27, 2008

BOFIT Discussion Paper No. 2/2008

Abstract:
This paper forecasts inflation in China over a 12-month horizon. The analysis runs 15 alternative models and finds that only those considering many predictors via a principal component display a better relative forecasting performance than the univariate benchmark.


Keywords: inflation forecasting, data-rich environment, principal components, China

JEL Classifications: C53, E31

2 comments:

Anonymous said...

On this subject, I strongly recommend Victor Shih's book on factions and finance. While I disagree with much of it, there is a serious discussion of decentralization as the cause of inflation.
Shih, Victor C., "Factions and Finance in China: Elite Conflict and Inflation,", Cambridge University Press (New York: 2008) ISBN 978-0-521-87257-7

Anonymous said...

There are issues with the World as we know it. Nothing that we don’t take for as they are since we were born. We need to evolve into closer knit societies and a free world. The biggest mis-understandings happen because of miscommunication. And that’s what needs to change. P2P version 2.0 softwares do not use any server or central control or monitoring. Some of the worlds first P2P version 2.0 products are from MetaASO called Mermaid So imagine no one being able to control information on this planet. Everyone would be forced to speak the truth because if they don’t someone will catch them and let the whole world know. That’s the reform we need. There are numerous cases in society where ethics and free information would help. Mermaid News is the News product that allows free exchange of news on the planet. Mermaid meeting can be used to conduct meetings globally without any central servers. Mermaid Multisource can be used to broadcast webcam, mic, tv channels etc. Mermaid Movie can broadcast pre recorded movies globally.
If you want to transfer files. BitTorrent is the way to go. It uses co-operative algorithms to transfer files. http://www.utorrent.com/
The search engine space is also changing from central search engine clusters to distributed search http://www.faroo.com