The Research On The Effects Of China's Inflation On Economic Growth In The Marketization Process

The research on the effects of inflation on economic growth is not only an important issue for economists but also for the economic policy makers. The economy's sustainable and prosperous development on the basis of stable price has been one of the important objectives of the macroeconomic policy-making. Through surveying a great number of the ducuments, this paper studies the effects of China's inflation on economic growth, and preliminarily explores the effects of marketization process on the relationship of China's inflation and economic growth.Firstly, the paper analyzes the impact mechanism of China's inflation on economic growth. At the initial stage of China's reform and opening-up, the incomplete market system, the low productivity and the insufficient supply are the key point to the slight inflation to serious inflation in short term, which adds to the disadvantage of our economic development. The effects China's inflation on economic growth is changing. The improvement of the marketization process makes the effects the inflation on economic growth positive from negative. [0]This is caused by the following reasons. The socialist's market economy is establishing and further improving. The price is setting foot on the track of market economy. Main bodies of investment are diversifying. The market is more and more competitive and the state's macro-control is more and more strengthening and regulatory capability.Secondly, this paper presents an empirical research by the related dates from 1978 to 2008. This paper analyzes the relationship between China's inflation and economic growth and the effects the marketization process on the former by granger causality test, impulse-response function, regression equation with cross-terms. The empirical results further validate the mechanism Conclusion that China's inflation is negative to economic growth in the initial stage of the reform and opening-up, the effects change from negative to positive since the improvement of the marketization process.Finally, according to the research results, this paper provides relative policy suggestions for the stable price and the economy's benign development.