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Adaptive Learning and Chinese Inflation Disequilibrium Analysis
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TitleAdaptive Learning and Chinese Inflation Disequilibrium Analysis  
AuthorFan Conglai and Gao Jiechao  
OrganizationNanjing University; 
Key WordsAdaptive learning; Phillips curve; Equilibrium inflation; Inflation deviation 
AbstractBased on the background about bounded rationality in public expectations, this paper firstly introduces three kinds of adaptive learning processes into the New Keynesian Phillips Curve in order to model the dynamic disequilibrium mechanism of inflation running. After using real data from 2001Q1 to 2015Q3 to estimate parameters, it selects out the most desired learning model. Simulation analysis finds that, (1) inflation running shows the disequilibrium feature under adaptive learning expectation; (2) reducing the influences of inflation expectation and inflation inertia in inflation driving mechanism can effectively inhibit the potential equilibrium inflation and the influence of inflation inertia is greater than inflation expectation; (3) improving the rational degree of public expectation could help decrease the equilibrium inflation bias. This paper proves the anti-inflation monetary policy should be implemented by two ways, (1) decreasing the deviations between actual inflation and equilibrium inflation by increasing the rational degree of public expectation; (2) guiding the economy to converge to low equilibrium inflation. And monetary policy should be combined with institutional improvement to inhibit potential equilibrium inflation. At the same time, expectation management should avoid myopic tendency and improve the information disclosure mechanism, in the long run, it also must improve people’s level of economic education and enhance the public’s judgment of the economy. 
Serial NumberWP1070 
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