Advanced Search
MyIDEAS: Login to save this article or follow this journal

Understanding the inflation-output nexus for China

Contents:

Author Info

  • Narayan, Paresh Kumar
  • Narayan, Seema
  • Smyth, Russell

Abstract

In this article we examine several hypotheses relating to output and inflation dynamics in China. The hypotheses tests are based on the exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model of Nelson [Nelson, D. (1991). Conditional heteroskedasticity in asset return: A new approach, Econometrica, 59, 347-370]. Our findings suggest that Chinese output-inflation behaviour is consistent with the hypothesis that increased inflation uncertainty lowers average inflation; the hypothesis that inflation volatility reduces economic growth and the hypothesis that higher output volatility increases economic growth. However, we find no support for the hypothesis that higher output volatility increases the average inflation rate.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6W46-4TVJ3M6-1/2/009000d4df7ffec798c6333ee62b2c8a
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 20 (2009)
Issue (Month): 1 (March)
Pages: 82-90

as in new window
Handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:82-90

Contact details of provider:
Web page: http://www.elsevier.com/locate/chieco

Related research

Keywords: Output Inflation EGARCH model China;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
  2. Mehrotra, Aaron & Peltonen, Tuomas & Santos Rivera, Alvaro, 2010. "Modelling inflation in China--A regional perspective," China Economic Review, Elsevier, vol. 21(2), pages 237-255, June.
  3. Carsten A. Holz, 2004. "China's Statistical System in Transition: Challenges, Data Problems, and Institutional Innovations," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(3), pages 381-409, 09.
  4. Laurence Ball, 1990. "Why Does High Inflation Raise Inflation Uncertainty?," NBER Working Papers 3224, National Bureau of Economic Research, Inc.
  5. Mirman, Leonard J, 1971. "Uncertainty and Optimal Consumption Decisions," Econometrica, Econometric Society, vol. 39(1), pages 179-85, January.
  6. Holland, A Steven, 1993. "Uncertain Effects of Money and the Link between the Inflation Rate and Inflation Uncertainty," Economic Inquiry, Western Economic Association International, vol. 31(1), pages 39-51, January.
  7. Demetriades, Panikos, 1988. "Macroeconomic aspects of the correlation between the level and variability of inflation," Economics Letters, Elsevier, vol. 26(2), pages 121-124.
  8. Stilianos Fountas & Menelaos Karanasos & Alfonso Mendoza, 2004. "Output Variability and Economic Growth: the Japanese Case," Bulletin of Economic Research, Wiley Blackwell, vol. 56(4), pages 353-363, October.
  9. Alex Cukierman & Stefan Gerlach, 2003. "The inflation bias revisited: theory and some international evidence," Manchester School, University of Manchester, vol. 71(5), pages 541-565, 09.
  10. Holland, A Steven, 1995. "Inflation and Uncertainty: Tests for Temporal Ordering," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 827-37, August.
  11. Marvin Goodfriend & Eswar Prasad, 2006. "A Framework for Independent Monetary Policy in China," IMF Working Papers 06/111, International Monetary Fund.
  12. 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.
  13. Coulson, N. Edward & Robins, Russell P., 1985. "Aggregate economic activity and the variance of inflation : Another look," Economics Letters, Elsevier, vol. 17(1-2), pages 71-75.
  14. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  15. Stilianos Fountas & Menelaos Karanasos, 2002. "Inflation, Output Growth, and Nominal and Real Uncertainty: Empirical Evidence for the G7," Working Papers 0064, National University of Ireland Galway, Department of Economics, revised 2002.
  16. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  17. Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 631-655, June.
  18. Guerineau, Samuel & Guillamont Jeanneney, Sylviane, 2005. "Deflation in China," China Economic Review, Elsevier, vol. 16(4), pages 336-363.
  19. Dennis W. Jansen, 1989. "Does inflation uncertainty affect output growth? Further evidence," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 43-54.
  20. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
  21. S. Fountas & A. Ioannidis & M. Karanasos, 2004. "Inflation, Inflation Uncertainty and a Common European Monetary Policy," Manchester School, University of Manchester, vol. 72(2), pages 221-242, 03.
  22. Fountas, Stilianos & Karanasos, Menelaos & Kim, Jinki, 2002. "Inflation and output growth uncertainty and their relationship with inflation and output growth," Economics Letters, Elsevier, vol. 75(3), pages 293-301, May.
  23. Kevin B. Grier & �lan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "The asymmetric effects of uncertainty on inflation and output growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 551-565.
  24. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  25. Robert J. Barro, 2001. "Economic Growth in East Asia Before and After the Financial Crisis," NBER Working Papers 8330, National Bureau of Economic Research, Inc.
  26. Hafer, R. W., 1992. "Inflation and price instability in China: A comment," China Economic Review, Elsevier, vol. 3(2), pages 213-218.
  27. Devereux, Michael, 1989. "A Positive Theory of Inflation and Inflation Variance," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 105-16, January.
  28. Grier, Robin & Grier, Kevin B., 2006. "On the real effects of inflation and inflation uncertainty in Mexico," Journal of Development Economics, Elsevier, vol. 80(2), pages 478-500, August.
  29. Grier, Kevin B. & Perry, Mark J., 1998. "On inflation and inflation uncertainty in the G7 countries," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 671-689, August.
  30. Wilson, Bradley Kemp, 2006. "The links between inflation, inflation uncertainty and output growth: New time series evidence from Japan," Journal of Macroeconomics, Elsevier, vol. 28(3), pages 609-620, September.
  31. Stefan E. Oppers, 1997. "Macroeconomic Cycles in China," IMF Working Papers 97/135, International Monetary Fund.
  32. Michael Funke, 2006. "Inflation In China: Modelling A Roller Coaster Ride," Pacific Economic Review, Wiley Blackwell, vol. 11(4), pages 413-429, December.
  33. Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Raghbendra Jha & Tu Dang, 2011. "Inflation variability and the relationship between inflation and growth," ASARC Working Papers 2011-08, The Australian National University, Australia South Asia Research Centre.
  2. Zhang, Chengsi & Clovis, Joel, 2010. "China inflation dynamics: Persistence and policy regimes," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 373-388, May.
  3. Siti Hamizah Mohd & Ahmad Zubaidi Baharumshah & Stilianos Fountas, 2012. "Inflation, Inflation Uncertainty and Output Growth: Recent Evidence from ASEAN-5 Countries," Discussion Paper Series 2012_07, Department of Economics, University of Macedonia, revised Jul 2012.
  4. Ahmad Zubaidi Baharumshah & Akram Hasanov & Stilianos Fountas, 2011. "Inflation and inflation uncertainty: Evidence from two Transition Economies," Discussion Paper Series 2011_05, Department of Economics, University of Macedonia, revised Apr 2011.
  5. Zhang, Chengsi, 2011. "Inflation persistence, inflation expectations, and monetary policy in China," Economic Modelling, Elsevier, vol. 28(1), pages 622-629.
  6. Zhang, Chengsi & Murasawa, Yasutomo, 2012. "Multivariate model-based gap measures and a new Phillips curve for China," China Economic Review, Elsevier, vol. 23(1), pages 60-70.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:82-90. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.