Two-Sided Mirror: An Analysis of Inflation's Dual Impact on China's Economic Growth

Ke Chen and Jongheuk Kim ()
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Ke Chen: Chungnam National University
Jongheuk Kim: Chungnam National University

East Asian Economic Review, 2024, vol. 28, issue 2, 175-219

Abstract: This study investigates the impact of inflation rate fluctuations on economic growth in China, with a particular focus on potential non-linear characteristics. The global economic impact of the COVID-19 pandemic notably heightens the study's relevance. The research that the unidirectional causal relationship from inflation to economic growth in China first strengthens and then weakens over time. Furthermore, there is an inflation rate threshold effect on economic growth, identified at 2%. Below this threshold, inflation positively influences economic growth, whereas above it, the impact turns negative. This finding underscores the importance of balancing economic growth with inflation control in the formulation of monetary policy.

Keywords: Inflation; Economic Growth; Threshold Effect; VAR; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E50 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0434

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