An Empirical Study On The New Keynes Phillips Curve In China

Inflation is related to the healthy development of the national economy and it's an important reference index for macroeconomic and financial policy control.The new Keynesian Phillips Curve(NKPC)model has been the main theory and method of studying inflation.The economic globalization and financial integration make capital international flow faster,the market opening expansion the scope and increased the intensity of resources optimal allocation.In this complex condition,which structure of the NKPC model can explain the actual situation in China better is an important issue.Therefore,this paper attempts to study the following two questions:(1)whether the original model is still suitable for China's current situation;(2)if not suitable,how to establish a new NKPC model to make it consistent.First,two kinds of NKPC models,which are popular in China,are used to study the Chinese data by means of generalized moment estimation(GMM)and maximum likelihood estimation(LM).It is found that the hybrid NKPC is more in line with the reality of China,but for the mixed NKPC,the two methods of estimation conclusions are contradictor.In order to solve this contradiction,the structure of NKPC should be improved to reflect the impact of external environmental changes.Second,the amount of money is extended to the new Keynesian model.But the impact of the output gap on the inflation rate is positive at first and the begins negative,which is not consistent with theory and intuition.This means that there is a problem with the structure of the NKPC curve in the original model or the parameter estimation method of the curve is problematic.Therefore there needs further study.Then this paper simplifies the model of Obersfield-Rogoff and derives the NKPC measurement model which can reflect the change of external environment.We use quarterly data from 1996 to 2016 in the model to analyze and found that:(1)the goodness of the fitting is generally improved and the significance of the variable is obviously enhanced;(2)the GMM and LM estimation results are very consistent;(3)inflation expectations,inflation inertia and output gap have a significant impact on inflation,which is consistent with the domestic research results.(4)changes in the external environment(foreign GDP gap)on the domestic inflation rate has a significant effect,the results is more consistent with the current situation in China.Finally,the conclusions and recommendations.The above studies show that China's current economic situation is more sensitive to the impact of the external environment changes.The external environmental factors should be considered when describe how inflation changes in China.This effect also should be taken into account in the supply side structure adjustment.