From the General to the Specific: Modelling Inflation in China
J. James Reade
University of Birmingham - Department of Economics
University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)
Dezember 18, 2011
Applied Economics Quarterly 57 (1), 27-44
This article uses automatic model selection procedures, based on the general-to-specific approach, to investigate inflation in China. A novelty of this article is the use of a technique called impulse indicator saturation which allows us to uncover instabilities and to specify a very general model and select down to a more specific model that best explains inflation in China. By and large, our findings suggest that China has been able to insulate itself against shocks from the US, although (maybe surprisingly) monetary growth in Europe seems to have an effect. Nonetheless, the main factors impacting Chinese inflation appear to be domestic, namely GDP growth and money growth.
Number of Pages in PDF File: 17
Keywords: Chinese inflation, dollar peg, automatic model selection procedure
JEL Classification: C32, E52, F33Accepted Paper Series
Date posted: April 19, 2012
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