The Analysis Of China Inflation Dynamic Mechanism Under The Framework Of NKPC

In recent years, with the rapid development of economy, China’s inflation has been in constant fluctuation. Although statistics show that the consumer price index keeps at moderate level, it has exhibited strong sustainability, which suggests that China’s monetary policy lag effect is quite obvious. Considering the facts that the inflation is the most important macroeconomic indicator and monetary target which all countries pay significant attention to, it is the key to monetary policy decisions to study the short-term dynamic characteristics of inflation and grasp its change rules.This article mainly studies dynamic characteristics of inflation from the perspective of inflation inertia and NKPC, which makes the results more comprehensive. Concrete structures are arranged as follow:the first part simply introduces the topic background, significance, research status at home and abroad, as well as the possible innovations and; the second part reviews the history of Phillips Curve theory, and derives the HNKPC model; the third part evaluates the degree of inflation inertia with the methods of Markov transfer zone system model and unknown structure mutation testing from the angle of the single variable equation, it is included that China’s inflation has strong inertia, and the inertia in the condition of low inflation is stronger than high inflation; the fourth part studies the dynamic characteristics by using the method of Quantile Regression under different conditions based on improved HNKPC model. The empirical results show that inflation in China has the characteristics of both prospective and backward, and has an uncertain relationship with the output gap; the fifth part compares the different conclusions and put forward the suggestions to better guide and manage inflation expectations as well as to reduce the inflation inertia.Research shows that guiding and managing public expectation has become the key to inflation governance in China.In addition, in order to improve the effectiveness of monetary policy, we still have to further clarify the special cause of inflation inertia and put forward corresponding measures. When discuss the causes of inflation inertia, this article haven’t added the learning factors due to the limitation of knowledge, which becomes the shortcoming of this article.