Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212896 
Year of Publication: 
2018
Series/Report no.: 
BOFIT Discussion Papers No. 11/2018
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
Inflation in emerging markets is often driven by large, persistent changes in food and energy prices. Core inflation measures that neglect or under-weight volatile CPI subcomponents such as food and energy risk excluding information helpful in assessing current and future inflation trends. This paper develops an underlying inflation gauge (UIG) for China, extracting the persistent part of the common component in a broad dataset of price and non-price variables. Our proposed UIG for China avoids the excess volatility reduction that plagues traditional Chinese core inflation measures. When forecasting headline CPI, the proposed UIG outperforms traditional core inflation measures over a variety of samples.
JEL: 
C13
C33
E31
E37
G15
C43
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-226-6
Document Type: 
Working Paper

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