An Analysis On The Interacting Relationship Among Economic Growth, Inflation And Income Gap Between Urban And Rural Areas Based On Panel VAR

The construction of harmonious society is influenced by the overheated economicgrowth, high inflation and the urban-rural income gap’s gradually expansion,thesebecome our country’s current problem and need to pay high attention, it worth us to dofurther research whether they have certain interactive relationship. Firstly, the papermakes a systematic literature review among the three aspects and the main body of thepaper uses a method that combining theoretical analysis with empirical analysis,qualitative analysis with quantitative analysis to study the interacting relationshipamong the three. Taking into account the data of1978-2010may be miss seriously, thatwill lead to a distortion empirical results, so the paper select the1993-2010annualdata of31provinces to build Panel VAR model to do contrast analysis,the researchfind that some conclusions of1978-2010are not compatible with China’s nationalconditions, but the conclusions of1993-2010are fitted well with the interactionrelationship among economic growth, inflation and the income gap between urban andrural areas. The model results shows that they have two kinds of opposite relationshipincluding move from positive to negative and negative to positive; the impulseresponse analysis shows that the same variable may react in the same way or responddifferently to different variables’ positive shock,similarly,different variables will havethe same or different responses to the same variable’s positive shock, concrete analysisas follows:(1) The effect of economic growth on inflation moves from positive tonegative, it indicates that at present economic growth’s extensive mode will induceinflation’s occurrence to to a large extent，however, the important economic goal thatGDP’s high growth coexistence with low inflation stably and macroeconomic in goodshape can also be achieved. Inflation has negative influence on economic growth allover the time.(2) At first, economic growth has negative effect on the urban-ruralincome gap, the effect may become positive on the basis of its variation trend.Urban-rural income gap’s effect on economic growth moves from negative to positive.(3) The influence of Urban-rural income gap on inflation moves from negative topositive. First, inflation inhibits the urban-rural income gap’s expansion, according toits variation tendency, inflation may play the role in expanding it; Variancedecomposition analysis explains that the most great contribution to response variable isitself, but the other two variables have a certain influence on it and some variable’s contribution rate are relatively large. The three, which have such close relationship,guide the national to take inflation and the income gap between urban and rural areas’extent into account when developing economy for the sake of reduce the three’sadverse effects to the minimum degree as far as possible, that will have importanttheory and practical significance on our country’s economic development. Finally, thepaper gives some corresponding policies and advices for these conclusions，apart fromthis，certain prospect of research are put forward to against the paper’s deficiencies.