Output gaps and inflation in Mainland China

Stefan Gerlach () and Wensheng Peng
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Wensheng Peng: Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

No 194, BIS Working Papers from Bank for International Settlements

Abstract: We estimate output gaps using three methods for Mainland China on annual data spanning 1982 – 2003. The estimates are similar and appear to co-move with inflation. Standards Phillips curves, however, do not fit the data well. This may reflect the omission of some important variable(s) such as the effect of price deregulation, trade liberalisation and/or changes in the exchange rate regime. We reestimate the Phillips curves assuming that there is an unobserved variable that follows an AR(2) process. The modified model fits the data much better and accounts for some of the surprising features of the simple Phillips curve estimates.

Keywords: output gap; omitted variables; Phillips curve; China (search for similar items in EconPapers)
JEL-codes: C22 E30 E40 E53 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2006-02
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: Output gaps and inflation in Mainland China (2006)
Working Paper: Output Gaps and Inflation in Mainland China (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:194

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