The Research On The Relationship Of Inflation And Economic Growth In China

To maintain price stability and economic growth are two important policy objectives in every governments. But they are not always coordinated with each other, and often have a conflict. High economic growth rate easily lead to inflation, inflation would undermine the pace of economic development conversely. So we should do our best to guard against inflation, to attain the balance between inflation and economic growth.This article firstly introduces the definition of inflation and economic growth, then introduces the Okun's law. And then elaborates the historical development of the Phillips curve, which studys the inflation rate, the unemployment rate and output. And illustrates Aggregate supply curve at last. Then sums up three inflation and great economic success we have already achieved since reform and opening-up in China. But from the point of economic growth factors and modle of economic growth, there still lack of the energy of sustained growth. On the base of theoretical analysis and practical economic analysis, the article tests the relationship between inflation and economic growth rate, it shows that the existence of two-way Granger causality between them. Then describes the Okun's curve in China, it shows an alternative relationship between the growth rate in GDP and unemployment rate. And then describes the Phillips curve in our country, estimates the original Phillips curve, an additional inflation expectations-augmented Phillips curve. Finally fits the potential output value in China, and introduces the adaptive expectations to the equation, and estimates the"output-price"Phillips curve. From the above empirical results, it proves that the inflation rate relates to the change in the GDP gap. On the above analysis, this article suggests some policy recommendations. We should continue to adjust the industrial structure, promote the optimization and upgrading, change the mode of economic growth, and maintain the stability of macroeconomic policy to enable the public to form reasonable expectations, to strengthen macro-control effects, further improve the social security system, maintaining a sustained and stable economy development rate.