Phillips Curve And Its Statistic Research In China

It is widely accepted that,Phillips curve was merely a negatively sloping curve representing the trade-off between inflation and unemployment. The truth is, Phillips curve has always been playing a vital part in Macroeconomics. Since its birth, Phillips curve has experienced different kinds of transformations with the development of Macroeconomics, being used as tools to publicize the theory of each school. Nowadays, the relationship it represents has reached far beyond inflation and unemployment, expanding to nominal demand's influence on real economy, even the inflation explanation. This paper tries to show all the transformation Phillips curve has experienced by reviewing the Phillips curve theory, as well as all the reasons behind them. Meanwhile, China is experiencing severe inflation problem, this paper tries to explain inflation based on statistic research of Phillips curve in China. The research is done district by district according to the marketization difference among districts, so as to evaluate whether Phillips curve in China exists and what the likely forms are.This paper consists of four parts. The foreword presents the issues that are about to discuss. The first part surveys the Phillips theory in Macroeconomics, different from merely a brief introduction of all the schools, this paper mainly focuses on the transformation of Phillips curve on forms. Three key transformations of Phillips curve are discussed: the change from nominal wage rates to inflation, from unemployment gap to GDP gap, and the change from modern Phillips curve to New Keynesian Phillips curve. Besides that, the specific hyper sis behind all these transformations are analyzed in detail.The second part is another emphasis of this paper, which is to do statistic research on Phillips curve in China. This part first explains the current situation of research on Phillips curve theory in China. Then our country is divided into 3 different levels according to their marketization difference. One representative district is chosen to be specifically researched in each level, and compared with the other districts whether in the same level or different levels. Two forms of Phillips curve are evaluated within each district, including the inflation-unemployment form Phillips curve and the inflation-output gap form Phillips curve. Besides that, several variables are taken into the regression in order to better explain inflation. At the end of this part, a brief statistic results is given: the inflation-unemployment Phillips curve is difficult to evaluate in China because of the data imperfection. However, the inflation-output gap Phillips curves do exist in most of our districts.The third part firstly introduces the marketization difference between districts, further explains the reason on doing statistic research by districts, and then further concludes statistic results of the second part. After that, this paper provides some policy advice on how to deal with inflation based on the results. At last, the possible reasons of this current inflation are analyzed and the policy implications are provided accordingly. The last part concludes the whole paper.