What Determine ChinaÃ¢â‚¬â„¢s Inflation?
We examine determinants of inflation in China. Analyses of both yearonyear and monthonmonth growth data confirm excess liquidity, output gap, housing prices and stock prices positively affecting inflation. Impulse response analyses indicate that most effects occur during the initial five months and disappear after 10 months. Effects of real interest rates and exchange rates on inflation are relatively weak. Our results suggest that output gap is as important as excess liquidity in explaining inflation trajectory. The central bank should closely monitor asset prices given their spillovers to inflation. Currently liquidity measures are still central for controlling inflation, but further liberalization of interest rates and exchange rates are critical.
|Date of creation:||Jan 2010|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anthony J. Makin, 2007. "Does China's Huge External Surplus Imply an Undervalued Renminbi?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(3), pages 89-102.
- Ben S. Bernanke & Mark Gertler, 1999.
"Monetary policy and asset price volatility,"
Federal Reserve Bank of Kansas City, issue Q IV, pages 17-51.
- Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
- Ben Bernanke & Mark Gertler, 2000. "Monetary Policy and Asset Price Volatility," NBER Working Papers 7559, National Bureau of Economic Research, Inc.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
- Chengsi Zhang, 2009. "Excess Liquidity, Inflation and the Yuan Appreciation: What Can China Learn from Recent History?," The World Economy, Wiley Blackwell, vol. 32(7), pages 998-1018, 07.
- Abeyratna Gunasekarage & Anirut Pisedtasalasai & David M. Power, 2004. "Macroeconomic Influence on the Stock Market: Evidence from an Emerging Market in South Asia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(3), pages 285-304, December.
- Rüffer, Rasmus & Stracca, Livio, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 696, European Central Bank.
- Rasmus Ruffer & Livio Stracca, 2007. "What is global excess liquidity, and does it matter?," Money Macro and Finance (MMF) Research Group Conference 2006 120, Money Macro and Finance Research Group.
- Wensheng Peng & DicksonC. Tam & MatthewS. Yiu, 2008. "Property Market And The Macroeconomy Of Mainland China: A Cross Region Study," Pacific Economic Review, Wiley Blackwell, vol. 13(2), pages 240-258, 05.
- Hiroshi Shibuya, 1992. "Dynamic Equilibrium Price Index: Asset Price and Inflation," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 10(1), pages 95-109, February.
- Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-565, September.
- 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.
- Yuanquan Chen, 2008. "Chinese Economy and Excess Liquidity," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(5), pages 63-82.
- Goodhart, Charles & Hofmann, Boris, 2000. "Do Asset Prices Help to Predict Consumer Price Inflation?," Manchester School, University of Manchester, vol. 68(0), pages 122-140, Supplemen.
- Vickers, John, 2000. "Monetary Policy and Asset Prices," Manchester School, University of Manchester, vol. 68(0), pages 1-22, Supplemen. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eab:macroe:22770. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)
If references are entirely missing, you can add them using this form.