Empirical Analysis of Inflation Spillover Effects among China, Japan, and South Korea

As the leading economies in East Asia, the existence of inflation spillover effects among China, Japan, and South Korea has become a focal issue in the academic discourse. However, existing studies have yielded inconsistent conclusions, often due to outdated data or the inclusion of additional countries, which complicates the analysis of trilateral dynamics. This paper addresses this gap by employing the most recent monthly macroeconomic data from January 2002 to March 2025 and applies both the Vector Error Correction Model (VECM) and the Global Vector Autoregression (GVAR) framework to empirically examine the presence and extent of inflation spillovers among the three countries. The findings indicate that Chinese inflation exerts a marginal influence on Japan and South Korea, while the reverse effect is negligible. Moreover, China’s real output is found to significantly affect inflation rates in both Japan and South Korea. These results provide valuable insights for inflation forecasting and monetary policy coordination among the three nations. The practical relevance of this study lies in offering policymakers in China, Japan, and South Korea guidance on forecasting inflation and other macroeconomic variables, thereby providing policy implications for the design of monetary strategies.