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Identifying the Shocks Driving Inflation in China

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  • Pierre L. Siklos

    () (Wilfrid Laurier University and Viessmann Research Centre Waterloo, Canada and The Rimini Centre for Economics Analysis, Italy.)

  • Yang Zhang

    () (University of Ottawa, Canada)

Abstract

The time profile of inflation in China resembles the one experienced in major industrial countries. Given the uncertainty surrounding the sources of economic shocks, this paper compares results from three sets of alternative identification conditions, namely the standard Blanchard-Quah approach, the approach of Cover, Enders, and Hueng (2006), as well as the model considered by Bordo, Landon-Lane and Redish (2004). Our principal finding is that inflation in China has been primarily driven by monetary factors. While aggregate supply factors may have pushed inflation to cross the threshold leading to deflation, monetary policy is primarily responsible for Chinese inflationary outcomes.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 34-07.

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Date of creation: Jul 2007
Date of revision: Jul 2007
Handle: RePEc:rim:rimwps:34-07

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Cited by:
  1. Richard CK Burdekin & Ilan Noy, 2005. "What Has Driven Chinese Monetary Policy Since 1990? Investigating the People's Bank's Policy Rule," Economics Study Area Working Papers 85, East-West Center, Economics Study Area.
  2. Hans Genberg & Pierre L. Siklos, 2009. "Revisiting the Shocking Aspects of Asian Monetary Unification," Working Papers 192009, Hong Kong Institute for Monetary Research.

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