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Purchasing Power Parity and Price Fluctuations in China before July 1937

Author

Listed:
  • Liuyan Zhao

    (School of Economics, Peking University, Beijing 100871, China)

  • Yan Zhao

    (School of Software & Microelectronics, Peking University, Beijing 100871, China)

Abstract

In this paper, we provide an empirical investigation of the purchasing power parity (PPP) hypothesis for China before July 1937. Using the monthly data from 1922 to 1937, we find clear and consistent evidence in favor of the purchasing power parity relationship. This naturally leads to the conclusion that the degree of Chinese market integration with the West was substantial before July 1937. These findings offer an empirical interpretation of the rise and fall of the Chinese price level during the Great Depression. It also has further implications of the impact of the American Silver Purchase Act of 1934 and the assessment of the 1935 currency reform on the Chinese economy.

Suggested Citation

  • Liuyan Zhao & Yan Zhao, 2018. "Purchasing Power Parity and Price Fluctuations in China before July 1937," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(3), pages 458-483, September.
    • Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:458-483
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0022-4
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    Cited by:

    1. Saeid Tajdini & Mohsen Mehrara & Ali Taiebnia, 2023. "Investigating the fluctuations of exchange rate based on monetary‐behaviour approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1242-1249, April.

    More about this item

    Keywords

    purchasing power parity (PPP); silver standard; market integration; 1935 currency reform; deflation; inflation;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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