Research On The Impact Of External Transmission On Regional Disparity Of Inflation: The Perspective Of International Trade Balance

The economic theories clarified that external chocks under opening circumstance wereone of the important factors that affected one country’s inflation. The researches proved thatthe change both balance of payments and the exchange rate caused by the external marketswould affect one country’s internal economic equilibrium. Since2008a widely discussionwere held about the reasons of a new-round china’s inflation. One of the key issues aimed atthe input factor.The external chocks not only impact on one nation’s macro economy, but also affect itsregional economic growth, industrial structural optimization and the enterprise’scompetitiveness. On account of this, the paper discusses how the changes both balance ofpayments and the exchange rate conduct and influence the regional difference of china’sinflation from the perspective of regional difference.This paper firstly describes quantitatively the status of china’s regional inflationdifference, and then analyzes qualitatively the mechanism of the external shocks and thechange of exchange rate to regional inflation difference through the channels of trade andcapital. Followed, the paper tests empirically using panel data for the31Chinese provincesfrom2004-2011. After controlling a series of factors (e.g., investment level, GRP, population,area, time trend, etc.), the result indicates the external chocks are one of the important factorsto affect china’s regional inflation difference.The paper draws the following conclusions:(1) The external chocks are one of theimportant factors to cause china’s regional inflation difference.(2) From the perspective offoreign trade, regional export scale is significant negative relate to regional inflation.(3) Theincreasing of the exchange rate (i.e., RMB devaluation) has a smaller impact on those moreopening region’s inflation and vice versa.(4)With the increasing of exchange rate, theinhibiting effect of export to inflation is decrease.(5) The main determinant of the regionalprice is still the regional money supply. Some pointed policy suggestions then present.