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Modelling inflation in China - a regional perspective

Aaron Mehrotra, Tuomas Peltonen () and Alvaro Santos Rivera

No 829, Working Paper Series from European Central Bank

Abstract: We model provincial inflation in China during the reform period. In particular, we are interested in the ability of the hybrid New Keynesian Phillips Curve (NKPC) to capture the inflation process at the provincial level. The study highlights differences in inflation formation and shows that the NKPC provides a reasonable description of the inflation process only for the coastal provinces. A probit analysis suggests that the forwardlooking inflation component and the output gap are important inflation drivers in provinces that have advanced most in marketisation of the economy and have most likely experienced excess demand pressures. These results have implications for the relative effectiveness of monetary policy across the Chinese provinces. JEL Classification: E31, C22

Keywords: China; GMM; inflation; new Keynesian Phillips curve; Regional (search for similar items in EconPapers)
Date: 2007-11
Note: 355041
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Related works:
Journal Article: Modelling inflation in China--A regional perspective (2010) Downloads
Working Paper: Modelling inflation in China: a regional perspective (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007829

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