Purchasing Power Parity and Price Fluctuations in China before July 1937

Liuyan Zhao () and Yan Zhao ()
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Liuyan Zhao: School of Economics, Peking University, Beijing 100871, China
Yan Zhao: School of Software & Microelectronics, Peking University, Beijing 100871, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2018, vol. 13, issue 3, 458-483

Abstract: In this paper, we provide an empirical investigation of the purchasing power parity (PPP) hypothesis for China before July 1937. Using the monthly data from 1922 to 1937, we find clear and consistent evidence in favor of the purchasing power parity relationship. This naturally leads to the conclusion that the degree of Chinese market integration with the West was substantial before July 1937. These findings offer an empirical interpretation of the rise and fall of the Chinese price level during the Great Depression. It also has further implications of the impact of the American Silver Purchase Act of 1934 and the assessment of the 1935 currency reform on the Chinese economy.

Keywords: purchasing power parity (PPP); silver standard; market integration; 1935 currency reform; deflation; inflation (search for similar items in EconPapers)
JEL-codes: C32 F31 F41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:13:y:2018:i:3:p:458-483

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