The Empirical Analysis Of The Fluctuation Of Price Level In China In The Transitional Period

With the transition to socialistic market economy of our country in the last decade and the economic inherent contradiction having changed enormously, the price-level of our country has gone through the course from high inflation to deflation. In the initial stage for" the Ninth- Five-Year Plan", our country managed the serious inflation during the 1992～1995 years, and realized" soft-land" of national economy. Then the phenomenon of economic high growth under the low inflation condition has appeared. But the continuous dropping of price has also appeared in midyear of 1997, when China economy falls into the low ebb of the deflation from peak of the inflation. At the same time, though our country is in deflation period, economy has still been keeping fast and steady development speed. Even in 1998 and 1999 when deflation is most serious, the economic growth rate of our country is still up to 7.8% and 7.2% separately. Under the background that global deflation is becoming more obvious and that the international economy generally slows down, one may well say that our economy outshines others. All economic theories emphasize that the higher growth in economy usually follows with higher inflation rate. Then what is the reason that the high growth and the deflation appear in our country at the same time? There are complicated backgrounds in deflation that our country appears, both related to the fact that our country is in marketization transition course and related to some special factors in the system. So this paper tries to analyze and explore the reason why high growth and deflation coexist in our country using TARCH model and Time-varying parameter model from the various perspectives of asymmetric effects of monetary policy on price level, the monetary reasons of deflation, gross supply curve and output gap, the effects of consumption demand and enterprises profit on price level.Firstly we introduce the price tendency in recent years of our country and the reason that the deflation appears. Our country industrial products factory's price index appears negative growth for the first time in June 1997, and then negative growth also appears in the retail price-level of the goods in October, resident consumption price appears negative growth in April 1998 which indicates that China economy's deflation has become the irrefutable fact. From October, 1997 to March, 2003, in the five-and-a-half-year period, resident consumption price has been lower than 1% for 57 months, and been under zero for 39 months, during which time the highest point in increasing degree is 1.7%. At the same time, retail price increasing index has been negative besides 3 months, and the minimum value has dropped by 3.5% in April 1999. Domestic scholars have different versions in the original cause of formation about this deflation, but they concentrate on the following aspects: social demand deficiency, excess production capacity caused by blind investment, repeated construction, slowing down of the increasing degree of money supply and money flow tempo, abnormal increasing of deposit and the relative slow increasing of loan of financial institution, etc. These views expound on the original cause of formation of deflation in our country from different sides, having much theoretical and practical values. But most scholars have only explained theoretically by methods of qualitative analysis, few scholars adopt the method of quantitative analysis which is a relatively easy econometric analytical method.After analyzing the original cause of formation of the deflation in our country, we try to analyze quantitatively and probe into the reason that high growth deflation coexist during the transition period from various angles: the symmetrical effect of monetary policy on price level, the monetary reason of the deflation, the gross supply curve and output gap, and consumption demand, enterprise benefit impacts on price, etc. This paper adopts resident's consumer price index at first, narrow money supply rate of increasing of M1(M1Rt), interest rat...