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Structural Inflation And The 1994 'Monetary' Crisis In China

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  • GENE HSIN CHANG
  • JACK HOU

Abstract

This paper examines the 1994 inflation in China, which occurred at a time when the government was vigorously conducting macroeconomic contraction. The event deserves more attention for both academic and policy research reasons. The paper shows that the inflation was led by food price increases, a step of price reform intended to adjust relative price ratios to the equilibrium level. The nature of the inflation was structural rather than monetary. This kind of structural inflation is common in transitional economies. Indeed, it largely characterizes chronic price increases that have occurred in such countries. A proper monetary policy curbing inflation should take into account the structural factor. Monetary growth should be targeted to the extent that it accommodates structural adjustment but does not cause pure monetary inflation. Copyright 1997 Western Economic Association International.

Suggested Citation

  • Gene Hsin Chang & Jack Hou, 1997. "Structural Inflation And The 1994 'Monetary' Crisis In China," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 73-81, July.
  • Handle: RePEc:bla:coecpo:v:15:y:1997:i:3:p:73-81
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    References listed on IDEAS

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    1. Naughton, Barry, 1991. "Why Has Economic Reform Led to Inflation?," American Economic Review, American Economic Association, vol. 81(2), pages 207-211, May.
    2. repec:mes:challe:v:37:y:1994:i:3:p:49-56 is not listed on IDEAS
    3. Chang, Gene Hsin, 1995. "What caused the hyperinflation at the Big Bang: Monetary overhang or structural distortion?," China Economic Review, Elsevier, vol. 6(1), pages 137-147.
    4. Gene Hsin Chang, 1994. "Monetary Overhang: Do Centrally Planned Economies Have Excessive Money Stocks?," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 79-90, July.
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