Analysis Of The Dynamic Characteristic Of Innation And The Relationship Between Innation And Ecinomic Growtn In China

Inflation as a significant indicator is used to measure the stability and health of macroeconomic. It is always the focus of attention of the whole social because its level is directly related to the real life and the stable society, and it is an important reference of macroeconomic policy makers to decide how to make macroeconomic policy, how to decide the inflation target and the appropriate monetary policy. The trend of the inflation and the all social economy throughout the reform and opening of China is in the continuous fluctuant state, showing its uncertainty. In order to develop the scientific, reasonable and effective macroeconomic policies which are suitable to the condition of our country, it is necessary to analyses the uncertainty of inflation in detail, to mine the dynamic fluctuation effect of inflation rate. And it’s better to take measure to limit the inflation rate at a certain level in order to ensure the development of economy continued, effective and healthy on the basis of the understanding the relationship between the inflation and economic growth. Thus, to analyses the actual data and policy for many years synthetically has its practical significance to decision to make decision scientifically, increase the efficiency of social production and improve the living level of people.Based on this above, the inflation data of the past30years is used to establish the Smooth Transition Regression model to empirically study of the dynamic characteristics of inflation and the correlation with the economic growth. The Smooth Transition Regression model had its feature that separates the series into several regions. The research is taken in different region to get the dynamic characteristics of the inflation and the feature between them. This paper will analyses the cause and impact in institution and policy in each region, and the result may provide a reference for decision-maker from a new point of view and also provide empirical outcomes from China for Keynesian economics. Therefore, the following part focuses on the settlement of the results on the research of the dynamic characteristics and the relationship with the economic growth systematically, understanding the development process of the theory and application method in detail, summarizing the advantages and disadvantages of previous studies. On the analysis, the Smooth Transition Regression model is decided to be applied to expand the research. In the theoretical part, we analyses the trend from1978to2012of the inflation series in depth based on making sure the definition and causes of inflation, and explore its fluctuating factors combined with the time and environmental policy changing. Meanwhile, there is uncertain nonlinear relationship between inflation and economic growth on the summary of past results. So this Smooth Transfer Regression model (STR) on the time interval segmented study provides a new perspective. Thus, in the empirical part, we use the Consumer Price Index, CPI and real GDP data to represent the inflation rate and real economic growth rate. The unit root test and the Granger causality test are taken to make sure the processed data is stable, relevant and in line with condition to establish the model. Then establish the model and analysis the result in detail.In conclusion, the results confirm and summarize the dynamic fluctuation mechanism of inflation and the nonlinear relationship with economic growth. From the measurement point of view, STR model can be better to describe the nonlinear dynamic characteristics of inflation. It is better to select the Logistic function as the transfer function of STR model; model calculations show that the transformed variable is the inflation rate that lags two phases. there are two the location parameter of STR,1.1726and3.2871, indicating that the level of inflation can be separated in3regimes,(-∞,1.1726)、(1.1726,3.2871)and(3.2871,+∞), And the higher the inflation rate range, the higher their persistence, and economic growth is more closely related, but its elasticity changes on economic growth is smaller, and vice versa. The conclusion deeply reflects the current situation of dynamic inflation and response relationship between inflation and economic growth, illustrates that the policy has a certain lag. So the policy maker should take measure to control inflation within an appropriate ranger to improve the efficiency of social production and living standards of people combining with the implementation of related policies to develop stably, rapidly and healthily.