Regional heterogeneity and the provincial Phillips curve in China

Makram El-Shagi and Kiril Tochkov

Economic Analysis and Policy, 2024, vol. 81, issue C, 1036-1044

Abstract: This paper explores the presence of regional heterogeneity in the response of inflation to changes in the output gap in China. We estimate the slope of the provincial Phillips curve for four different price indices using quarterly data over the period 2000–2022. The presence of regional heterogeneity is tested by comparing a fixed effects and a mean group estimator. Heterogeneity in the provincial slope is confirmed robustly only in the case of the CPI with around half of provinces exhibiting a positive coefficient. Our findings point to the share of industry and market advancement as significant contributors to the sensitivity of inflation to provincial demand shocks. Moreover, we reveal a relatively low correlation between the national and provincial output gaps as well as inflation rates, which suggests that regional heterogeneity diminishes the effectiveness of unitary monetary policy that targets CPI inflation.

Keywords: Phillips curve; Inflation; China; Regional heterogeneity (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S031359262400016X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Regional Heterogeneity and the Provinicial Phillips Curve in China (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:81:y:2024:i:c:p:1036-1044

DOI: 10.1016/j.eap.2024.01.016

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().