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The strength of the inflation-output link in China

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  • Mikael Juselius
  • Wenzhe Li

Abstract

We systematically investigate the relationship between China's inflation, eco nomic slack, and expectations through the lens of New Keynesian Phillips Curves (NKPC). Extending existing research, we employ inflation expectations from Con sensus Economics over recent samples and assess the stability of the estimates. Despite China's unique and evolving institutions, NKPC estimates are stable and show significant roles for both the output gap and inflation expectations in contrast to previous findings. Incorporating open-economy variables marginally enhances the models performance. Our results suggest that the New Keynesian framework can be adopted to China without adjustments for specific institutional features.

Suggested Citation

  • Mikael Juselius & Wenzhe Li, 2026. "The strength of the inflation-output link in China," BIS Working Papers 1353, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1353
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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