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Performance Of China’S Core Inflation Measures For Monetary Policy

Author

Listed:
  • YUSHAN HU

    (Renmin University of China, School of Economics, Beijing, P. R. China)

  • PENGLONG ZHANG

    (��Tsinghua University, School of Public Policy and Management, Beijing, P. R. China)

Abstract

In this paper, China’s core inflation is defined as any price changes that are caused by the money supply. This definition is especially relevant to examining monetary policy because the money supply is controllable by China’s central bank. This paper develops a New Keynesian DSGE model with a quantity-based monetary rule that fits real aggregated data from China to analyze core inflation’s key characteristics. Eight different approaches are used to estimate core inflation in China. By constructing VAR models of output growth, money supply growth and core inflation, we estimate the response of core inflation measures to the money supply shock. By matching the response to money supply shocks in both the model and the data, we compare the performance of different core inflation measures for monetary policy in China.

Suggested Citation

  • Yushan Hu & Penglong Zhang, 2024. "Performance Of China’S Core Inflation Measures For Monetary Policy," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(07), pages 2207-2234, December.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:07:n:s0217590821500168
    DOI: 10.1142/S0217590821500168
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    More about this item

    Keywords

    Core inflation; monetary policy; monetary shock;
    All these keywords.

    JEL classification:

    • 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
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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