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IDENTIFYING THE SHOCKS DRIVING INFLATION IN CHINA
Author(s) -
Siklos Pierre L.,
Zhang Yang
Publication year - 2010
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2010.00498.x
Subject(s) - deflation , economics , inflation (cosmology) , china , monetary policy , identification (biology) , aggregate supply , monetary economics , macroeconomics , supply shock , aggregate (composite) , aggregate demand , keynesian economics , physics , botany , theoretical physics , political science , law , biology , materials science , composite material
The time profile of inflation in China resembles the one experienced in major industrial countries. Given the uncertainty surrounding the sources of economic shocks, the present paper compares results from three sets of alternative identification conditions. Our principal finding is that inflation in China has been primarily driven by monetary factors. Although aggregate supply factors might have pushed inflation to cross the threshold leading to deflation, monetary policy is primarily responsible for Chinese inflationary outcomes.