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Wilfrid Laurier University School of Business & Economics
July 25, 2014
 
 
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Economics

2006-08 EC: Identifying the Shocks Driving Inflation in China (working paper)


P. Siklos & Y. Zhang

published: 2006 | Research publication | Working Paper - Economics

ABSTRACT: We follow the usual approach of estimating small order VARs. However, in view of the uncertainty surrounding the sources of economic shocks, this paper compares results using three sets of identification conditions, the standard Blanchard-Quah approach, an approach recently proposed by Cover, Enders, and Huang (2005), as well as the set of identifying restrictions considered by Bordo, Landon-Lane and Redish (2004) . Our principal finding is that inflation in China has been primarily driven by monetary factors. While aggregate supply factors may have pushed inflation to cross the threshold leading to deflation, monetary policy is primarily responsible for Chinese macroeconomic outcomes. 

A copy of this paper can be obtained from psiklos@wlu.ca

revised Mar 6/07

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