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Assessment of inflation in China and the role of international food prices

Lilja, Henrik LU (2012) NEKH01 20112
Department of Economics
Abstract
This paper aims at describing the drivers of long-run consumer price inflation in China as well as determining the role of imported inflation through changes in international food prices. The study was conducted with an OLS-regression on a Two-Pillar Phillips curve theoretical framework. Analysis of year-on-year growth data concludes that the main drivers of CPI inflation are: output gap, house prices, real effective exchange rate and international food prices, which all have a positive effect on inflationary levels. On the other hand, excess money growth proved to have an opposite effect. Output gap proved to be the main driver, yet the role of international food prices was significant and instantaneous. Inflationary pressure from... (More)
This paper aims at describing the drivers of long-run consumer price inflation in China as well as determining the role of imported inflation through changes in international food prices. The study was conducted with an OLS-regression on a Two-Pillar Phillips curve theoretical framework. Analysis of year-on-year growth data concludes that the main drivers of CPI inflation are: output gap, house prices, real effective exchange rate and international food prices, which all have a positive effect on inflationary levels. On the other hand, excess money growth proved to have an opposite effect. Output gap proved to be the main driver, yet the role of international food prices was significant and instantaneous. Inflationary pressure from international food prices makes it hard for policy makers in China to address the situation of increasing consumer prices, refraining domestic economic growth. (Less)
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author
Lilja, Henrik LU
supervisor
organization
course
NEKH01 20112
year
type
M2 - Bachelor Degree
subject
keywords
China, Inflation, International food prices
language
English
id
2338205
date added to LUP
2012-02-13 13:36:00
date last changed
2012-02-13 13:36:00
@misc{2338205,
  abstract     = {This paper aims at describing the drivers of long-run consumer price inflation in China as well as determining the role of imported inflation through changes in international food prices. The study was conducted with an OLS-regression on a Two-Pillar Phillips curve theoretical framework. Analysis of year-on-year growth data concludes that the main drivers of CPI inflation are: output gap, house prices, real effective exchange rate and international food prices, which all have a positive effect on inflationary levels. On the other hand, excess money growth proved to have an opposite effect. Output gap proved to be the main driver, yet the role of international food prices was significant and instantaneous. Inflationary pressure from international food prices makes it hard for policy makers in China to address the situation of increasing consumer prices, refraining domestic economic growth.},
  author       = {Lilja, Henrik},
  keyword      = {China,Inflation,International food prices},
  language     = {eng},
  note         = {Student Paper},
  title        = {Assessment of inflation in China and the role of international food prices},
  year         = {2012},
}