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Output Gap, Inflation and the Social Welfare Loss in China
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TitleOutput Gap, Inflation and the Social Welfare Loss in China  
AuthorChen Li-feng , Fan Hong-zhong and Kevin Huang  
OrganizationSchool of Economics, Huangzhong University of Science and Technology;Department of Economics, Vanderbilt University 
Key WordsOutput Gap; GGL Output Gap; Inflation; Wage Inflation; Social Welfare Loss 
AbstractWe consider and calibrate a new Keynesian monetary policy dynamic stochastic general equilibrium model with unemployment, and compute the social welfare loss based on output gap and GGL output gap respectively. Meanwhile, the result of sensitivity analysis and counterfactual analysis shows that compared to inflation and output targeting monetary policy, the purely output gap(and the GGL output gap) or growth targeting leads to much more social welfare loss. Further, we estimate the actual social welfare loss of China based on the quarterly data from 2002 to 2011.  
Serial NumberWP308 
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