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Price instability and inflation: empirical evidence from the People's Republic of China

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  • Qiang Du

Abstract

The relationship between price instability and inflation is re-examined using the data for the People's Republic of China over the period 1953-91. The empirical results indicate that Friedman's conjecture of positive relationship between price instability and inflation is valid in China, where the economic system is quite different from those in market-oriented economy countries. Such a validation implies that higher inflation in China is unfavourable as it causes higher price instability that will reduce the efficiency of price system in allocating resource, hinder economic growth and could even result in economic disorder. This also suggests that a consistent and stable anti-inflation policy that reduces price instability would be preferable in China.

Suggested Citation

  • Qiang Du, 1994. "Price instability and inflation: empirical evidence from the People's Republic of China," Applied Economics Letters, Taylor & Francis Journals, vol. 1(2), pages 25-28.
    • Handle: RePEc:taf:apeclt:v:1:y:1994:i:2:p:25-28
    DOI: 10.1080/135048594358302
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    References listed on IDEAS

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    1. Hafer, R. W., 1992. "Inflation and price instability in China: A comment," China Economic Review, Elsevier, vol. 3(2), pages 213-218.
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    5. Glezakos, Constantine & Nugent, Jeffrey B., 1984. "Price instability and inflation: The Latin American case," World Development, Elsevier, vol. 12(7), pages 755-758, July.
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    7. repec:bla:econom:v:52:y:1985:i:206:p:209-23 is not listed on IDEAS
    8. Yi, Gang, 1990. "Inflation and price instability : An empirical study of the People's Republic of China," China Economic Review, Elsevier, vol. 1(2), pages 155-165.
    9. A. I. McLeod & W. K. Li, 1983. "Diagnostic Checking Arma Time Series Models Using Squared‐Residual Autocorrelations," Journal of Time Series Analysis, Wiley Blackwell, vol. 4(4), pages 269-273, July.
    10. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
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    Cited by:

    1. A. C. Arize & Malindretos John, 2000. "Does Inflation Variability Affect the Demand for Money in China? Evidence from Error-Correction Models," International Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 47-60.

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