The Balassa-Samuelson effect and inflation in the Chinese provinces
AbstractThe Balassa-Samuelson effect is employed to explain the observed differences in inflation between the Chinese provinces. A three-good model is proposed to better take account of the specific features of China. This model which includes, besides Balassa-Samuelson effect, demand side factors, is tested for 29 Chinese provinces using cross-sectional and panel data for the 1992-1999 period. The econometric results show that the hypothesis that the Balassa-Samuelson effect explains the durable differences in inflation between provinces is not refuted. This suggests that the Chinese economy broadly works as a market economy.
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Bibliographic InfoPaper provided by CERDI in its series Working Papers with number 200106.
Date of creation: 2001
Date of revision:
Publication status: Published in China Economic Review, 2002, pages 134-160
real effective exchange rate and China.; inflation; Balassa-Samuelson effect;
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