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Two-Sided Mirror: An Analysis of Inflation's Dual Impact on China's Economic Growth

Author

Listed:
  • Chen, Ke

    (Chungnam National University)

  • Kim, Jongheuk

    (Chungnam National University)

Abstract

This study investigates the impact of inflation rate fluctuations on economic growth in China, with a particular focus on potential non-linear characteristics. The global economic impact of the COVID-19 pandemic notably heightens the study's relevance. The research that the unidirectional causal relationship from inflation to economic growth in China first strengthens and then weakens over time. Furthermore, there is an inflation rate threshold effect on economic growth, identified at 2%. Below this threshold, inflation positively influences economic growth, whereas above it, the impact turns negative. This finding underscores the importance of balancing economic growth with inflation control in the formulation of monetary policy.

Suggested Citation

  • Chen, Ke & Kim, Jongheuk, 2024. "Two-Sided Mirror: An Analysis of Inflation's Dual Impact on China's Economic Growth," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 28(2), pages 175-219, June.
    • Handle: RePEc:ris:eaerev:0434
    DOI: 10.11644/KIEP.EAER.2024.28.2.434
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    More about this item

    Keywords

    Inflation; Economic Growth; Threshold Effect; VAR; Monetary Policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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