Driving Factors,Provincial Transmission Of China's Inflation And The Effectiveness Of Monetary Policy

Inflation has always been a popular topic in the field of macroeconomics,and is also an important issue related to the national economy and people' livelihood.The most of existing literature at home and abroad studies inflation from the aspects of causes and effects,and some literature researches the international transmission of inflation,but there is little literature that studies inflation from the perspective of provincial transmission of inflation.In addition,the research on the effectiveness of monetary policy is based on the national political and economic situation,and part of research on regional monetary policy gives the practical significance and concrete measures according to the geographical position and levels of economic development of different regions,but there is no literature that analyzes the effectiveness of monetary policy from the aspect of provincial transmission of inflation.This paper will construct a hybrid model based on NKPC to research the causes of China' inflation according to the relative research at home and abroad.What's more,we will add the spatial econometric factor,named economic geographical spatial weight matrix into HNKPC Model,and use Dynamic-panel Spatial Autoregressive Model to analyze the characteristics of inflation in terms of time and space.Different from previous literature,we use the local projection method innovatively to calculate the impulse response functions of inflation of Chinese provinces,so we can research the speed and duration of provincial transmission of inflation.At the same time,we divide the Chinese provinces into four parts,which are eastern area,central area,western central and northeastern area to research provincial transmission of inflation in different areas.The results show that the factors causing inflation in China are multiple,including monetary factor,demand factor,cost factor and external factor.The inflation of one province will have an impact on the inflation of surrounding provinces in two years,and the effect will disappears gradually after that.At the sametime,different regions have different response when the money supply suffers shocks,and monetary policy have time lag effect in dealing with inflation.Then we analyze the relationship between the effectiveness of monetary policy and the inflation,the results show that local factors and the inflation of the surrounding areas all affect the inflation of one area,causing the levels of inflation in different areas are diverse,so the monetary policy will have different effects dealing with inflation in different areas.Finally,we give suggestions of monetary policies on regional inflation,including the implementation of differentiated monetary policies,strengthening the independence of central bank's monetary policy and strengthening the coordination between monetary policies and other economic policies.