From the General to the Specific: Modelling Inflation in China

Applied Economics Quarterly 57 (1), 27-44

17 Pages Posted: 19 Apr 2012

See all articles by J. James Reade

J. James Reade

University of Reading, Department of Economics

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: Dezember 18, 2011

Abstract

This article uses automatic model selection procedures, based on the general-to-speci fic 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 speci fic model that best explains inflation in China. By and large, our fi ndings 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 eff ect. Nonetheless, the main factors impacting Chinese inflation appear to be domestic, namely GDP growth and money growth.

Keywords: Chinese inflation, dollar peg, automatic model selection procedure

JEL Classification: C32, E52, F33

Suggested Citation

Reade, J. James and Volz, Ulrich, From the General to the Specific: Modelling Inflation in China (Dezember 18, 2011). Applied Economics Quarterly 57 (1), 27-44. Available at SSRN: https://ssrn.com/abstract=2041934

J. James Reade

University of Reading, Department of Economics ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Ulrich Volz (Contact Author)

University of London - School of Oriental and African Studies (SOAS) - Economics

London, WC1E 7HU
United Kingdom

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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