Civil Engineering Reference
In-Depth Information
(
)
,
(
)
,
(
)
,
(
−
)
,
ε
(
)
,
figure out
a
1
t
i
b
1
t
i
c
1
t
i
G
1
t
i
1
t
i
then substitute them into Eq. (
9
):
1
a
−
1
1
(
+
)=
π
(
)
−
(
)
π
(
)
−
(
)
(
)
−
(
)
(
)
π
t
1
t
i
b
1
t
i
t
i
c
1
t
i
y
t
i
−
1
G
1
t
i
−
1
t
i
2
(3) Repeat step 2 for k times, given
ε
0
=
0
.
0001, and make
|
π
k
(
t
+
1
)
−
π
k
−
1
0
; finally we select
E
t
i
π
t
i
+
1
(
+
)
|≤
ε
(
)=
π
k
(
+
)
t
1
t
i
t
1
.Our results of prediction
are as follows:
The inflation value above is based on benchmark model; the prediction is
regardless of the effect of money, interest rates, and house prices to inflation.
The main purpose of the prediction is not used for real prediction but for
providing a unified inflation value to simulate inflation expectations in each
path model
5
Simulation of Inflation Expectations
5.1
Assume Variables Value in 2012Q4
For simulation in the condition of keeping annual output growth rate by 7.5 %, and
annual money growth rate by 14 % and changing house prices steadily. All variables
values in 2012Q4 must be assumed for simulation (Table
1
):
(1) Output gap: The national output growth target is 7.5 % in 2012, output in
2012Q1-2012Q3 can be obtained, we assume output in 2012Q4, and then
output gap in 2012Q4 can be calculated.
(2) House prices: Assume that house prices regulation still continue, so we assume
the next quarter house price index equals recently eight quarter average housing
prices index.
(3) Money growth rate: The national nominal money growth rate target is 14 % in
2012; money growth value of the first two quarters in 2012 is obtained. We
assumed real money growth rate is 12 % or 14 % in 2012Q4.
(4) Interest rates: Considering interest rate policy relative stability, we assumed
real interest rate is
−
1 % or 1 % in 2012Q4.
5.2
Simulation
All simulations are in the comprehensive model:
Simulation 1: First figure out coefficients
a
of 2012Q4 by the
benchmark model (3) when assuming that inflation is 0.025 in 2012Q4 and 0.026 in
(
t
i
)
,
b
(
t
i
)
,and
c
(
t
i
)
Tabl e 1
Simulation of
inflation expectations by
benchmark model
Quarter
2012Q4
2013Q1
2012Q2
Inflation expectations
0.025
0.026
0.025
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