The Dynamics of Inflation and Output in China:Based on the Time-variant Phillips Curve
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| Title | The Dynamics of Inflation and Output in China:Based on the Time-variant Phillips Curve
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| Author | Wu Ge and Liu Kun |
| Organization | Monetary Policy Department II, The people’s Bank of China |
| Email | wuge@pbc.gov.cn,lkun@pbc.gov.cn |
| Key Words | Inflation; Output; Phillips Curve; Monetary Policy |
| Abstract | Based on the microeconomic foundation of firms’ pricing activities, this paper analyses the dynamics of inflation and output in China. We establish a time-variant Phillips Curve and find the tradeoff between inflation-output is nonlinear. The above conclusions well explain the facts in China that the inflation was more sensitive to the output after this round of international financial crisis, and they also predict the huge adverse impacts of the deflation. We suggest the monetary policy should pay more attention to the time-variant Phillips Curve in the future, then could adjust the stance and lean against wind better under different circumstances. |
| Serial Number | WP536 |
| Time | 2013-10-15 |
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