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China's Inflation: Demand-Pull or Cost-Push?

Author

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  • Xiaojing Zhang

    () (Institute of Economics, Chinese Academy of Social Sciences (CASS))

Abstract

This paper studies the determinants of China's inflation and finds that demand-pull factors have been more important than cost-push factors in driving the inflation in the past decade. Because China's economic growth will gradually moderate and because the adjustment of the prices of the factors of production is also underway, the cost-push factors may soon play a more significant role in driving future inflation. Thus the Keynesian-style demand-side policy will not be enough to control inflation. More attention must now be given to supply-side management—such as dismantling monopolies, boosting private investment, encouraging innovation, and improving productivity—to mitigate the medium- to long-term inflation pressure. © 2012 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Xiaojing Zhang, 2012. "China's Inflation: Demand-Pull or Cost-Push?," Asian Economic Papers, MIT Press, vol. 11(3), pages 92-106, Fall.
  • Handle: RePEc:tpr:asiaec:v:11:y:2012:i:3:p:92-106
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    Cited by:

    1. Marlene Amstad & Ye Huan & Guonan Ma, 2014. "Developing an underlying inflation gauge for China," BIS Working Papers 465, Bank for International Settlements.

    More about this item

    Keywords

    inflation; demand factors; labor cost; and supply-side management;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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