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.
Download InfoIf 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.
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
Date of revision:
Contact details of provider:
Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
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
- 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)
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.:
- Chow, G.C., 1990.
"Capital Formation And Economic Growth In China,"
356, Princeton, Department of Economics - Econometric Research Program.
- Borensztein, Eduardo & Ostry, Jonathan D, 1996. "Accounting for China's Growth Performance," American Economic Review, American Economic Association, vol. 86(2), pages 224-28, May.
- Chen, Baizhu, 1997. "Long-Run Money Demand and Inflation in China," Journal of Macroeconomics, Elsevier, vol. 19(3), pages 609-617, July.
- Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January.
- Zuliu F. Hu & Mohsin S. Khan, 1997.
"Why Is China Growing So Fast?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 44(1), pages 103-131, March.
- Stefan E. Oppers, 1997. "Macroeconomic Cycles in China," IMF Working Papers 97/135, International Monetary Fund.
- Gerlach, Stefan & Yiu, Matthew S., 2004. "Estimating output gaps in Asia: A cross-country study," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 115-136, March.
- Hasan, Mohammad S., 1999. "Monetary Growth and Inflation in China: A Reexamination," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 669-685, December.
- Wing Thye Woo, 2003. "The Travails of Current Macroeconomic and Exchange Rate Management in China: The Complications of Switching to a New Growth Engine," Development and Comp Systems 0310001, EconWPA.
- 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.
- Mehrotra, Aaron & Peltonen, Tuomas & Santos Rivera, Alvaro, 2007. "Modelling inflation in China – a regional perspective," BOFIT Discussion Papers 19/2007, Bank of Finland, Institute for Economies in Transition.
- Mehrotra, Aaron N. & Peltonen, Tuomas A. & Santos Rivera, Alvaro, 2007. "Modelling inflation in China - a regional perspective," Working Paper Series 0829, European Central Bank.
- Chengsi Zhang & Joel Clovis, 2009. "Modeling China Inflation Persistence," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 89-110, May.
- Min Gong & Wenpu Li, 2010. "Assessing the role of aggregate demand and supply shocks in China’s macroeconomic fluctuation," Frontiers of Economics in China, Springer, vol. 5(3), pages 464-488, September.
- Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010.
"China as a reserve sink: The evidence from offset and sterilization coefficients,"
Journal of International Money and Finance,
Elsevier, vol. 29(5), pages 951-972, September.
- Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007. "China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients," Working Papers 102007, Hong Kong Institute for Monetary Research.
- Nagayasu, Jun, 2009. "Regional Inflation in China," MPRA Paper 24722, University Library of Munich, Germany.
- Antonin Rusek, 2008. "Inflation Dynamics in New EU Member States: The Czech Case," International Advances in Economic Research, Springer, vol. 14(2), pages 191-204, May.
- Chengsi Zhang, 2009. "Structural instability of China inflation dynamics," Frontiers of Economics in China, Springer, vol. 4(1), pages 30-45, March.
- Juuso Kaaresvirta & Aaron Mehrotra, 2009.
"Business surveys and inflation forecasting in China,"
Economic Change and Restructuring,
Springer, vol. 42(4), pages 263-271, November.
- Kaaresvirta, Juuso & Mehrotra, Aaron, 2008. "Business surveys and inflation forecasting in China," BOFIT Discussion Papers 22/2008, Bank of Finland, Institute for Economies in Transition.
- Matthieu Bussière & Arnaud Mehl, 2008. "China's and India's roles in global trade and finance - twin titans for the new millennium?," Occasional Paper Series 80, European Central Bank.
- 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.
- Osman, Mohammad & Louis, Rosmy & Balli, Faruk, 2008. "Which Output Gap Measure Matters for the Arab Gulf Cooperation Council Countries (AGCC): The Overall GDP Output Gap or the Non-Oil Sector Output Gap?," MPRA Paper 11612, University Library of Munich, Germany.
- Gerlach-Kristen, Petra, 2009. "Business cycle and inflation synchronisation in Mainland China and Hong Kong," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 404-418, June.
- Scheibe, Jörg & Vines, David, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR).
If references are entirely missing, you can add them using this form.