Modeling China's inflation dynamics: An MRSTAR approach

Abstract

This paper examines the nonlinearity of China's inflation rate and models its nonlinear dynamics using the multiple-regime smooth transition autoregressive model. The empirical results show that a four-regime logistic smooth transition autoregressive model can be used to model the nonlinear dynamics of China's inflation rate, and the impulse response analysis shows that the effect of shocks is transient and appears to be asymmetrical between the impulse responses to positive and negative shocks.