Civil Engineering Reference
In-Depth Information
Tabl e 2
Simulation of
inflation expectations by
comprehensive model at
2012Q4
Interest rates
Money growth rates
House prices growth rates
−
1%
1%
12 %
−
1 %
0.027
0.025
0 %
0.029
0.026
1 %
0.0274
0.018
14 %
−
1 %
0.024
0.018
0 %
0.028
0.0253
1 %
0.026
0.013
Tabl e 3
Simulation of
inflation expectations by
comprehensive model at
2013Q1
Interest rates
Money growth rates
House prices growth rates
−
1%
1%
−
12 %
1 %
0.026
0.025
0 %
0.027
0.025
1 %
0.0258
0.021
14 %
−
1 %
0.0248
0.023
0 %
0.0262
0.025
1 %
0.025
0.018
2013Q1, and then substitute the coefficients into this formula in condition that the
inflation expectations are unknown:
(
)=
π
(
)
−
(
−
)
(
)
−
(
)
π
i
−
1
(
)
−
(
)
(
)
−
ε
G
t
i
t
i
a
t
i
E
t
i
π
t
i
+
1
t
i
b
t
i
t
i
c
t
i
y
i
−
1
t
i
(10)
n
j
=
1
z
j
(
t
i
)(
π
(
t
j
)
−
a
(
t
−
j
)
E
t
i
π
t
i
+
1
(
t
i
)
−
b
(
t
i
)
π
t
i
−
1
(
t
i
)
−
c
(
t
i
)
y
t
i
−
1
(
t
i
))
G
(
t
i
)=
(11)
When Eq. (10) equals (11), we can figure out inflation expectations. The results are
as follows:
From the viewpoint of mode, we assume the inflation is 0.027 in 2012Q4
(Table
2
).
While keeping real money growth by 14 %, real house price index by 1 %, and
real interest rate by 1 %, inflation rate will be 1.3 % in 2012Q4.The best way to
prevent deflation is to reduce real interest rates to
−
1 %, and then inflation rate will
be 2.6 %.
Simulation 2: In the same way, we can obtain the simulated inflations value for
2013Q1 when money growth rates, housing prices rates, and interest rates change
for 2012Q3 (Table
3
).
From the viewpoint of mode, we assume the inflation is 0.025 in 2013Q1.
While keeping real money growth by 14 %, real house price index by 1 %, and
real interest rate by 1 %, inflation rate will be 1.8 % in 2013Q1.The best way to
prevent deflation is to reduce real interest rates to
−
1 %, and then inflation rate will
be 2.58 %.
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