A scepter Structural Vector Autoregression Analysis
Fang Guo
Yokohama National University
12th September, 2012
What Causes Chinas High Inflation?
A Threshold Vector Autoregression Analysis
Abstract
afterward the world(a) financial crisis, a new round of pompousness hits China with the inflation set peaking at 5.1% in 2010. This report employs threshold nonrecursive structural vector autoregression analysis to explore the lopsided effects of macro-variables on inflation mingled with funky and gamey inflation regimes. The empirical evidence shows that adjusting the municipal interest rate in China whitethorn be an effective expression in controlling inflation in a utmost inflation regime, but not in a low inflation regime. In a senior high inflation regime, high inflation rate may cause the macro-authorities to increase the domestic interest rate, in an attempt to stabilize high inflation. An fossil oil price increases may increase inflation in a high inflation regime, whereas there is no such apparent effect in a low inflation regime.
JEL variety:?C01; C32; E31; E42
Keywords: China; Inflation; Threshold vector autoregression analysis
1.
Introduction
From 2001 to 2012, several rounds of inflationary and deflationary periods have emerged in China. Especially after global financial crisis in 2008, Chinas inflation oscillates greatly. When the deliverance changes from a deflationary regime to an inflationary regime, the dynamic adaption of inflation to monetary policy is likely to change. The central cuss will respond differently to changes in economic variables in a inflationary and deflationary environment. While a fare of regime-switching models have been developed to analyze these types of regime changes, however, the paper may be the first to employ the threshold nonrecursive structural vector autoregression, aiming at exploring the asymmetric effects of macro-variables on inflation between low and high inflation regimes in China....If you want to bring in a full essay, order it on our website: Ordercustompaper.com
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