Understanding the Inflation-Output Nexus for China

Posted: 10 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Seema Narayan

affiliation not provided to SSRN

Russell Smyth

Monash University - Department of Economics

Date Written: 2009

Abstract

In this article we examine several hypotheses relating to output and inflation dynamics in China. The hypotheses tests are based on the exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model of Nelson [Nelson, D. (1991). Conditional heteroskedasticity in asset return: A new approach, Econometrica, 59, 347-370]. Our findings suggest that Chinese output-inflation behaviour is consistent with the hypothesis that increased inflation uncertainty lowers average inflation; the hypothesis that inflation volatility reduces economic growth and the hypothesis that higher output volatility increases economic growth. However, we find no support for the hypothesis that higher output volatility increases the average inflation rate.

Suggested Citation

Narayan, Paresh Kumar and Narayan, Seema and Smyth, Russell, Understanding the Inflation-Output Nexus for China (2009). China Economic Review, Vol. 20(1), pp. 82-90, 2009, Available at SSRN: https://ssrn.com/abstract=2080678

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Seema Narayan

affiliation not provided to SSRN ( email )

Russell Smyth

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

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