Empirical Research On Inflation Regional Differentials In China

Since reform and opening up, China has ma inta ined a rapid economical growth,and the nationa l comprehensive strength has gradually increased, however,inter-regiona l imba lances of economic development ha ve become increasingly severe.Under the polic y of unified nationa l monetary policy and fiscal policy, inflationdifferentia ls between regions are also serious problems. In this paper, based on theresearch in China and abroad, from the perspectives of region as well as sectors whichconstitutes the CPI to explore the reasons and the governance recomme ndations forinflation d ifferentia ls, meanwhile us ing dynamic factor model, the state space model,ARDL model to the emp irical analys is, the ma in contents are as follows:(1) dyna micfactor model is used for the decomposition of inflation d ifferentia ls between China’seastern, central, western,northeastern regions and the country, the factors areaccording to the range which factors affecting d ivided into two types: First ly, thecommon factor which affect all the areas, like the eastern, centra l, western andnortheastern regions; Secondly, regiona l factors whic h only affected its own regions,then the contribution rate of the common factor and regiona l factors was estimated,the empirica l results s how that common factors contributed up to69%or more,indicating that the common factor has a greater influence on these regions and theywere affected by the respective regiona l factors, among these regions whichinfluenced more by regiona l factors are northeast regio n and the western regio n.(2)the use of ARDL model is for the further ana lys is and d iscussion of the causes of thecommon factor, the ma in research is to discuss long-term relationships amongeconomic growth, monetary polic y and the common factor, the results show that thereis a lo ng-term relationship amo ng the above factors, and as the economy grows, thereis a narrowing trend of commo n factor, but the unified monetary policy will expandthe common factor.(3)As for the ana lys is of the regio nal factor, this paper is fro m theperspective of sectors which constitutes the CPI, the state-space model is applied forthe analysis o f the sectors which caused regiona l factor, and calculated every sectors’contribution to regiona l factors, the calculated results show that food sector andresidentia l sector have a relative ly large contribution rate, which is the ma in reasonleading to the regional factors. In addition, contribution rate of regional factors in thewestern and northeast region are highest, so for the northeastern and western regions needed to be further ana lyzed, according to the sector’s contrib ution rate ind icates thatthe northeast region and the western regions were separately affected by householdequipme nt and services sector and medical supplies and service sector, then we try toexplain the reason for that pheno menon.(4) Finally, based on all the emp irical resultsgive a conclusion and the corresponding policy recommendations.