Analysis Of China's New Keynesian Phillips Curve

Steady growth and low inflation are the core economic goals of our central government.The Phillips Curve links three goals of macroeconomic policy together which is economic growth,price stability and full employment.It is an important tool to analyze the macroeconomic situation and formulate economic policies and has always been a cynosure.The Phillips curve extended to the New Keynesian framework is now playing an important role in both China and the world macroeconomics.This paper examines the role of short-term inflationary pressures,excess liquidity,rational expectations and adaptive expectations in the New Keynesian Phillips Curve.The nonparametric NKPC model,the semiparametric linear NKPC model and the semiparametric variable coefficient NKPC model are constructed on the basis of the traditional parametric linear NKPC model.The nonparametric NKPC model,the semiparametric linear NKPC model and the semiparametric variable coefficient NKPC model are constructed by using the nonparametric and semiparametric estimation methods to relax the structural relations among the economic variables.In addition,the quarterly data from the fourth quarter of 1996 to the first quarter of 2016 were respectively used to make empirical analysis for these four models.The empirical results show that compared with other three econometric models,the semi-parametric model is the ideal form for studying the New Keynesian Phillips Curve.At the same time,based on the model we can draw the following conclusions: First,the new Keynesian Phillips curve,described in terms of the inflation-output gap,exhibits microwaves at least during the sample rather than in the traditional sense of linear form or purely concave or convex curves.Secondly,the backward adaptive expectation and the forward rational expectation both have positive effects on the formation of inflation in China,and the influence of rational expectation is relatively stronger.Thirdly,the formation of inflation in China cannot be explained well by the excess liquidity.The excess liquidity based on M2 has weak positive driving effect on inflation,while the effect of excess liquidity on M1 is not significant.