WU Ge, LIU Kun:The Dynamic Study on Inflation and Output in China——Based on the Time-variant Phillips Curve

Abstract  Based on the microeconomic foundation of firms' pricing activities, this paper analyzes the dynamics of inflation and output in China. We establish a time-variant Phillips Curve and find the tradeoff between inflation-output is nonlinear. The above conclusions explain well the facts in China that the inflation was more sensitive to the output after this round of international financial crisis, and they also predict the huge adverse impacts of the deflation. We suggest that the monetary policy should pay more attention to the time-variant Phillips Curve in the future.

Key words： Inflation    Output    Phillips Curve    Monetary Policy

Source: Finance & Trade Economics , No.10, 2014