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Structural instability of China inflation dynamics

  • Chengsi Zhang

    ()

This article employs recently developed unknown structural break tests to investigate intrinsic structural instability in China inflation dynamics over 1981¨C2007. In order to capture accurately the statistical nature of potential structural beak, we use asymptotic p-value function under the non-standard distribution condition to compute the p-values for structural change tests in the presence of nuisance parameter. Empirical results suggest that China inflation dynamics witnessed a significant structural change at the end of 1994 and the instability appears to be originated from the dynamic parameters in the underlying model. The paper discusses important policy implications of the empirical findings through impulse response analyses.

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File URL: http://hdl.handle.net/10.1007/s11459-009-0002-7
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Article provided by Springer in its journal Frontiers of Economics in China.

Volume (Year): 4 (2009)
Issue (Month): 1 (March)
Pages: 30-45

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Handle: RePEc:spr:frecch:v:4:y:2009:i:1:p:30-45
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  1. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  2. Chengsi Zhang & Hong Pang, 2008. "Excess Liquidity and Inflation Dynamics in China: 1997-2007," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(4), pages 1-15.
  3. Chengsi Zhang & Joel Clovis, 2009. "Modeling US inflation dynamics: persistence and monetary policy regimes," Empirical Economics, Springer, vol. 36(2), pages 455-477, May.
  4. Guerineau, Samuel & Guillamont Jeanneney, Sylviane, 2005. "Deflation in China," China Economic Review, Elsevier, vol. 16(4), pages 336-363.
  5. Stefan Gerlach & Wensheng Peng, 2006. "Output gaps and inflation in Mainland China," BIS Working Papers 194, Bank for International Settlements.
  6. Hasan, Mohammad S., 1999. "Monetary Growth and Inflation in China: A Reexamination," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 669-685, December.
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