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Global Output Gap and Domestic Inflation in China

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Listed:
  • Zhang Chengsi
  • Xingchen Ji
  • Wensheng Dai

Abstract

This paper evaluates whether globalization has led to greater sensitivity of Chinese consumer price inflation to the global output gap. The empirical analysis uses quarterly data over the period 1995-2012. The global output gap is measured by weighted output gap of China’s top eighteen trading partners. Estimating Phillips curve models and vector autoregressive models, we find that global capacity constraints have both explanatory and predictive power for domestic consumer price inflation in China. Therefore, the central bank of China should react to developments in global output gaps. Key words: Globalization, Inflation, Output gap, China.JEL: C22, E31, E37, E52, E58. U radu se ocenjuje da li je globalizacija dovela do povećane osetljivosti inflacije potrošačkih cena u Kini u odnosu na globalni proizvodni jaz. Empirijska analiza koristi kvartalne podatke za period 1995-2012. Globalni proizvodni jaz je meren ponderisanim proizvodnim jazom osamnaest najvećih trgovinskih partnera Kine. Ocenjujući modele Filipsove krive i vektorske autoregresivne modele, uočili smo da globalna ograničenja kapaciteta imaju moć da predvide i objasne inflaciju domaćih potrošačkih cena u Kini. Stoga, centralna banka Kine bi trebalo da reaguje na razvoj globalnog proizvodnog jaza. Ključne reči: Globalizacija, Inflacija, Proizvodni jaz, Kina.

Suggested Citation

  • Zhang Chengsi & Xingchen Ji & Wensheng Dai, 2017. "Global Output Gap and Domestic Inflation in China," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(1), pages 17-30.
    • Handle: RePEc:voj:journl:v:64:y:2017:i:1:p:17-30:id:9
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    Keywords

    globalization; inflation; output gap; china.jel: c22; e31; e37; e52; e58. u radu se ocenjuje da li je globalizacija dovela do povećane osetljivosti inflacije potrošačkih cena u kini u odnosu na globalni proizvodni jaz. empirijska analiza koristi kvartalne podatke za period 1995-2012. globalni proizvodni jaz je meren ponderisanim proizvodnim jazom osamnaest najvećih trgovinskih partnera kine. ocenjujući modele filipsove krive i vektorske autoregresivne modele; uočili smo da globalna ograničenja kapaciteta imaju moć da predvide i objasne inflaciju domaćih potrošačkih cena u kini. stoga; centralna banka kine bi trebalo da reaguje na razvoj globalnog proizvodnog jaza. ključne reči: globalizacija; inflacija; proizvodni jaz; kina.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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