Empirical Analysis On Economic Characteristics Of Chinese Economic Growth In The Conversion Phase

The study on important macroeconomic characteristics, such as inflation inertia, the price transmission mechanism and measuring for the stability of economic growth, on the economic growth in the conversion phase of Chinese economic activities has theoretical and practical significance. In 2008 the United States experienced the financial crisis has proved that monetary policy is not a panacea, and monetary policies alone can not solve all the problems on the economy.Excessive reliance on monetary policy, ignoring the economic characteristics of the information reflected from the price system, can not stop the accumulation of contradictions and outbreak under the recovery of prosperity and at the same time maintain price stability in the system. In order to accurately grasp the economic situation and make scientific decisions, the policy maker should respect information from the price system about the economic characteristics.China’s economy is currently facing a complex economic situation in the conversion phase.,we need more scientific and reliable measurement methods to extract information from the economic data. Information includes non-stationary features of inflation and economic growth data,uncertainty dynamic structure of macro data, unstability of the causal relationship between the price indice, and the difficulty of empirical research on economic characteristics. In this paper, we propose an Infinite-State Markov-switching Model based on the hierarchical Dirichlet random process by mixing hierarchical Gibbs sampling method. The pluralistic form of the model provids a new method for dynamic structure and multi-causality with time-varying analysis on non-stationary structure and unstable economic data. We then apply the modelto empirical research of economic characteristics such as inflation inertia, the price transmission mechanism and measure the stability of economic growth in order to answer the controversial issues of economic theory and to support scientific practice in realistic policy.Inflation inertia model based on the New Keynsian Phillips Curve and the Taylor rules, is a tool which links economic theory and social practice. In this paper, Infinite-State Markov-switching Model documents an effective measure of inflation inertia. The measurement methods can be applied to the price index system which consists of the upper, middle and lower strands.. By investigating the price transmission mechanism between the price index, we can extract information regarding the latent economic characteristics from the price system. Therefore, wecan evaluate the policy relevant impacts on the current economic activities from the prospective of the aggregate demand and supply framework. In this thesis, we propose an integrated use of measurement methods to measure the stability of China’s economic growth. Compared with a number of advanced economies and emerging market countries, our results show different economic growth with different economic structure leading to differences stability of economic growth. In terms of output volatility and price volatility, we measure the stability of economic growth. The measurement approach implemented in this thesis has important practical significance in evaluating the stability of China’s economic growth in the conversion phase.Based on the theoretical models in the post-crisis era, China’s economic growth fits into the new normal, undergoing an economic transition phase with the complex economic situation, we find the difficult of existing econometric methods for empirical analysis on macroeconomic data of the economic characteristics. In the study of the theoretical framework, we sum up the relevant literature on monetary policy, inflation inertia, deflation, price transmission and economic growth.A large body of literature on the measurement methods focuses onsummarizing time series and Markov regime switching model,tracking advances in Bayesian nonparametric statistical methods.The proposed research framework, combined with innovative theoretical issues measurement methods, we employ the innovative approaches to promote theoretical research in this thesis.First, we designed the Infinite-State Markov-switching Autoregressive model(IMS-AR) and its algorithm. On the one hand, the model with hierarchical Dirichlet process combining time series analysis model, which is applicable to non-stationary data and structural instability econometric analysis. As opposed to traditional Markov probability models, our modelnot only solves the problem that give the model parameters estimation, but also gives an effective measure of the stability of the structure of the time series follow AR. We provide the district system of the number of states after posterior distribution, calculate regimes breakpoint with probability structure, and conduct the posterior estimation of lagged coefficient and variance of the disturbance items. When applying IMS-AR model that focuses on estimate of varying parameter instead of the structure of emphasis on the nature of the mutation in the Regimes, we referred to herein as Infinite-State Markov regime Time-varying autoregressive model(RTV-AR). This article expand RTV-AR to multivariate time series analysis model, design and implement Infinite-State Markov regime Time-varying vector autoregressive model(RTV-VAR). we then can applied to Time-varying multivariate Granger causality test. This innovation measurement model implemented compatible with a non-stationary and structural instability of the economic data, thun we can fully exploit the latent information in its original data, and analyze the dynamic structure of economic data, binary or multivariate measure of variable causation provides a new method of econometrics tomultivariate Time-varying causal relations and non-stationary data.Secondly, this thesis derived from the theoretical model of inflation inertia based on the New Keynsian Phillips Curve and the composition of the Taylor rules combines IMS-AR model to incorporate econometric models of inflation inertia. Empirical results show that the recent US inflation inertia generated Regime changes, and its monetary policy highly relevant, which confirms the validity of the theoretical model of inflation inertia, warning the cost of frequent use of monetary policy tools. Interest rate policy instruments in accelerating effect lead to unstable inflation inertia, destabilize the price system in a broad sense, exposing flaws of monetary policy framework with single objective. China’s inflation inertia responded to interest rate policy is obvious noteworthy, which shows that China has initially formed a relatively sensitive and effective market-oriented interest rate system. Such transmission mechanism to enhance the efficiency of monetary policy also indicates interest rates prudent use of tools. Taking inflation inertia perspectives on deflation empirical evidence that ends prices of demand side maintain long-term stability of inertia structure, the consumer price level remained stable, reflecting demand firm; upper production price of supply side, after continued productivity growth after generating a process of structural differentiation, the China’s economic activities are adjusting to restore stability. Empirical analysis shows that China’s economy has experienced sustained growth in the long-term productivity of the proces. Structural problems in this process make the accumulation of recent PPI continue to decline. The dynamic behavior of PPI are different from that of CPI. The differentiations lies in between the stability of inertia PPI and CPI index, which shows that real demand has not declined, indicating that growth in consumption capacity from the demand side has played a stimulating role of economic and price stability. According to the principle of "productivity norm", price changes resulting from productivity should not be offset by the current low inflation and the falling prices contribute to industrial restructuring. At the same time under the "productivity norm", but also the need to prevent inconsistencies and factor productivity leads to deflation, and economic agents might otherwise misinterpreted as real demand fell, which leads to a general decline in the price level.Third, in this thesis we apply RTV-VAR model to examine the multivariate time varying causal relations of price transmission mechanism. we find out the overall structure of the price transmission mechanisms by the Binary Granger causality analysis, extract the core structure of the price transmission mechanism by multivariate Granger causality, and summarizes its dynamic evolution. We study the effect from Supply and demand of China’s economy from the perspective of price transmission mechanism. The empirical results show that China’s economy is subject to the demand-pull effects significantly. Since the influence of external demand has weakened, it isnecessary to adjust monetary policy, to stimulate firm and moderate aggregate demand. The role of external supply shocks cannot be ignored. Prices adjust from production processes, in line with "productivity norm" will help to promote supply-side reform, which makes industrial restructuring play a role. Monetary policy plays an important role in the dynamic evolution of the price transmission mechanism. Especially under the influence of the international experience of the impact of factors, maintaining a relatively stable domestic economic environment has played an effective role in regulating. Benign deflation is conducive to industrial upgrading and structural adjustment, moderately ease monetary policy and productivity gains helped offset the impact of external shocks, and ensure the smooth implementation of supply side reforms.Finally, this thesis applys the RTV-AR model to propose the stability measure model of economic growth, Empirical results of international comparison shows that rapid economic growth driven by investment and expansion factor inputs can not be sustained in the long-term. Excessive dependence on exports makes instability of economic growth as a vulnerable factors. Foreign experience as a warning to China, seize the current opportunities, and actively adapt to the new normal economic development, timely and complete transformation of the mode of economic growth is a priority. The economic growth of China and Japan shares much similarities, both of which have benefited from the boost exports and the effect of government policies to support the development. However, China’s domestic economy continues to play a role in stimulating the economy, despite the recent slowdown in economic growth.; The results indicate that insufficient domestic demand will not slow the China’s economic growth, while the Japanese economy in similar situations of old and new driving force of economic growth can not succeeding even the implementation of ongoing quantitative easing can not change the plight of deflation. Whether it is in developed economies, or in emerging market economies, in the course of development there are unstable to stable economic growth in the transition from the transition phase. Empirical evidence shows that China’s economic growth and inflation dynamics after 2010 show a trend of dynamic stability, which reduces the volatility of the local stable normality and other new features.