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Structural instability of China inflation dynamics

Author

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  • ZHANG Chengsi

    (School of Finance, Renmin University of China, Beijing 100872, China)

Abstract

This article employs recently developed unknown structural break tests to investigate intrinsic structural instability in China inflation dynamics over 1981¨C2007. In order to capture accurately the statistical nature of potential structural beak, we use asymptotic p-value function under the non-standard distribution condition to compute the p-values for structural change tests in the presence of nuisance parameter. Empirical results suggest that China inflation dynamics witnessed a significant structural change at the end of 1994 and the instability appears to be originated from the dynamic parameters in the underlying model. The paper discusses important policy implications of the empirical findings through impulse response analyses.

Suggested Citation

  • ZHANG Chengsi, 2009. "Structural instability of China inflation dynamics," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(1), pages 30-45, March.
    • Handle: RePEc:fec:journl:v:4:y:2009:i:1:p:30-45
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0002-7
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    inflation; inflation dynamics; structural change; monetary policy;
    All these keywords.

    JEL classification:

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

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