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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

Working Paper Series

Date posted: April 17, 2008 ; Last revised: May 12, 2008

Suggested Citation

Mehrotra, Aaron N. and Sánchez-Fung, José R., Forecasting Inflation in China (January 27, 2008). BOFIT Discussion Paper No. 2/2008. Available at SSRN: http://ssrn.com/abstract=1121762

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Contact Information

Aaron N. Mehrotra (Contact Author) Bank of Finland - Institute for Economies in Transition (BOFIT) ( email ) Helsinki 00101 Finland
European University Institute - Economics Department (ECO) ( email ) Villa San Paolo Via della Piazzuola 43 50133 Florence Italy
José R. Sánchez-Fung Kingston University ( email ) Penrhyn Road Kingston-upon-Thames Surrey KT1 2EE United Kingdom