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Was China's Inflation in 2004 Led by an Agricultural Price Rise?

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  • Xian Xin
  • Xiuqing Wang

Abstract

The escalation of agricultural prices starting from the end of 2003 raised concern about a new round of inflation in China. This paper assesses the impacts of China's 2003 agricultural output decline on agricultural prices and inflation using a general equilibrium model calibrated to actual data. The results indicate that the 5% decline in agricultural output can only explain 50% of observed changes in agricultural prices, 40% of observed changes in the consumer price index, and 20% of observed changes in the commodity price index. This suggests that China's 2003 agricultural output decline was not sufficient alone to produce the observed agricultural price increases and inflationary pressure in 2004. This position is counter to the conventional view that agricultural prices led to the 2004 inflation. L'escalade des prix agricoles qui a commencé vers la fin de 2003 a suscité des inquiétudes au sujet d'une nouvelle poussée inflationniste en Chine. Le présent article évalue l'impact de la diminution du rendement agricole de la Chine en 2003 sur les prix agricoles et l'inflation, à l'aide d'un modèle d'équilibre général calibréà partir de données réelles. D'après les résultats, la diminution de 5% du rendement agricole ne peut expliquer que 50% des changements observés dans les prix agricoles, que 40% des changements observés dans l'indice des prix à la consommation et que 20% des changements observés dans l'indice des prix des produits de base. Ces résultats autorisent à penser que la diminution du rendement agricole n'a pu à elle seule susciter la hausse observée des prix agricoles et la pression inflationniste en 2004. Cette position est contraire à l'explication classique selon laquelle les prix agricoles ont contribuéà l'inflation observée en 2004

Suggested Citation

  • Xian Xin & Xiuqing Wang, 2008. "Was China's Inflation in 2004 Led by an Agricultural Price Rise?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(3), pages 353-364, September.
  • Handle: RePEc:bla:canjag:v:56:y:2008:i:3:p:353-364
    DOI: 10.1111/j.1744-7976.2008.00133.x
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