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สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์
Puey Ungphakorn
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Call for Papers: PIER Research Workshop 2025
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28 December 2016
20161482883200000
No. 051

Trend Inflation Estimates for Thailand from Disaggregated Data

Abstract

This paper constructs a new trend inflation measure for Thailand based on the multivariate unobserved components model with stochastic volatility and outlier adjustments (MUCSVO) of Stock and Watson (2015). Similar to core inflation, the MUCSVO constructs a measure of the underlying trend based on disaggregated data, but with time-varying sectoral weights that vary with the volatility, persistence and co-movement of the sectoral inflation series. Based on the empirical results, the majority of sectoral weights show significant time-variation, in contrast to their relatively stable expenditure shares. Volatile food and energy sectors that are typically excluded from core inflation measures also turn out to be less volatile, more persistent and explain approximately 10 percent of filtered trend inflation rate movements. Compared to various other trend inflation measures, we show that the MUCSVO delivers trend estimates that are smoother, has narrower confidence bands, and are able to forecast 8 quarter-ahead average inflation more accurately both in-sample and out-of-sample, especially in the post 2000 period.

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JEL: C33E31
Tags: disaggregate pricesinflationoutlier adjustmentstochastic volatilitytime-varying parameterstrend-cycle decompositionunobserved components
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Pym Manopimoke
Pym Manopimoke
Bank of Thailand
Vorada Limjaroenrat
Vorada Limjaroenrat
Puey Ungphakorn Institute for Economic Research

Puey Ungphakorn Institute for Economic Research

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Email: pier@bot.or.th

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