Output Gaps and Inflation in Mainland China
AbstractWe estimate output gaps using three methods for Mainland China on annual data spanning 1982-2003. The estimates are similar and appear to co-move with inflation. Standard Phillips curves, however, do not fit the data well. This may reflect the omission of some important variable(s) such as the effect of price deregulation, trade liberalisation and/or changes in the exchange rate regime. We reestimate the Phillips curves assuming that there is an unobserved variable that follows an AR(2) process. The modified model fits the data much better and accounts for some of the surprising features of the simple Phillips curve estimates.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 202005.
Length: 23 pages
Date of creation: Nov 2005
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output gap; Phillips curve; China; omitted variab les;
Other versions of this item:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-02 (All new papers)
- NEP-CBA-2007-09-02 (Central Banking)
- NEP-CNA-2007-09-02 (China)
- NEP-MAC-2007-09-02 (Macroeconomics)
- NEP-MON-2007-09-02 (Monetary Economics)
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