The cost channel of monetary policy and inflation behavior in china
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This paper derives an empirical test model of the cost channel on the basis of a New-Keynesian general equilibrium model, i.e., an Interest Rate Augmented Phillips curve, and utilizes GMM Estimation to explore the significance, intensity, and time-varying nature of the cost channel based on quarterly data from 1995 to 2014 in China. The empirical analysis finds: First, compared to the traditional channel, the cost channel in China appears to be quite significant and presents strong time-varying characteristics. Additionally, both the traditional demand-side channel and the supply-side cost channel fail to describe the dynamic behavior of inflation. Second, in the process of two-round price rises, in 2007 and from 2010 to the first half year of 2011, the tight monetary policy resulted in rising inflation, and the cost channel had a significant impact on the price rises. Furthermore, the above-mentioned research results remain robustto various financing rates. Finally, we propose corresponding policy advice based on our findings.
Abstract
This paper derives an empirical test model of the cost channel on the basis of a New-Keynesian general equilibrium model, i.e., an Interest Rate Augmented Phillips curve, and utilizes GMM Estimation to explore the significance, intensity, and time-varying nature of the cost channel based on quarterly data from 1995 to 2014 in China. The empirical analysis finds: First, compared to the traditional channel, the cost channel in China appears to be quite significant and presents strong time-varying characteristics. Additionally, both the traditional demand-side channel and the supply-side cost channel fail to describe the dynamic behavior of inflation. Second, in the process of two-round price rises, in 2007 and from 2010 to the first half year of 2011, the tight monetary policy resulted in rising inflation, and the cost channel had a significant impact on the price rises. Furthermore, the above-mentioned research results remain robustto various financing rates. Finally, we propose corresponding policy advice based on our findings.
참고문헌 (28)
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