Research About Nonlinear Relationship Between Inflation And Economic Growth In China

Now,China's economy has gradually changed from high-speed growth to medium-high-speed growth mode of the new normal,the economic structure has been continuously optimized and upgraded,the driving force of economic growth has gradually changed from factor-driven,investment-driven to innovation-driven.With the constantly improving of quality and efficiency of economy,the general assault does not bring much harm to the normal operation of the economy,but,once the assault reaches and exceeds a certain critical point,the development and operation of the economy will be subjected to a very serious damage.Inflation has the same impact on economy like that,for a long time,economists always pay attention to the impact of inflation on economic growth.Therefore,studying and understanding the correlation between inflation and economic growth,which contribute to know how inflation affects the economy has become the main research topic of some economists.Based on this,this paper mainly discusses whether there is a stable relationship between inflation and economic growth.If it exists,how inflation affects economic growth,and how the impact will be under different periods.At the same time,in order to know whether the relationship between inflation and economic growth will be different in different areas with different economic development levels,this paper also focuses on the relationship between inflation and economic growth in different regions to explore the influence of development level on the relationship between economic growth and inflation.The significance of this study is to discuss the relationship between inflation and economic growth,and get the impact of inflation on economic growth,so as to provide recommendations for the implementation of economic policies.At the same time,by studying the differences in the impact of prices on economic growth between different developed regions,we can provide different suggestions for economic policies in different regions according to the differences in the degree of economic development,so as to improve the applicability of economic policies.The research on the relationship between inflation and economic growth mainly uses Granger causality test,impulse response function and PSTR nonlinear model analysis.Firstly,ADF unit root test and co-integration test are used to ensure the stability of the regression model for inflation and economic growth to prevent the occurrence of pseudo-regression.Then,Granger causality test is used to verify whether there is a correlation between inflation and economic growth,and the existence of the correlation is a necessary condition for the follow-up study.After determining the correlation between inflation and economic growth,we continue to use impulse response function to analyze the relationship between inflation and economic growth in different lag periods.The impulse response function can accurately and clearly show what effect inflation has on economic growth in different lag periods.Then,PSTR model is used to verify whether the relationship between inflation and economic growth will change in different economic environment,that is,whether there is a threshold effect between inflation and economic growth.Finally,the provinces in China are divided into three regions according to the East,Central and West respectively,and what difference the relationship between inflation and economic growth in different regions has is verified by PSTR model.Through a series of analysis,this paper finally draw some conclusions:Firstly,inflation has a positive correlation with economic growth in the short term,but in the long term,inflation has a negative correlation with economic growth,and the negative correlation increases with the inflation rate rising.Secondly,the difference in the degree of development will lead to the difference of relationship between inflation and economic growth,and more developed are more sensitive to inflation.Therefore,when inflation appears,the damage that developed area suffers is more serious than backward areas.Finally,the implementation of economic policies needs to be determined according to different periods,and more developed areas need more careful consideration.The innovation of this paper is to use panel data and PSTR model to analyze and compare the correlation between inflation and economic growth in different regions in China,and this paper is more comprehensive in the selection of threshold variables.As for the division of different regions,according to the natural differences of developed degree from west to east,the provinces in China are divided into three regions:east,middle and West according to their locations,this division is conducive to the implementation of regional policies,and regions with the same level of development are more likely to exchange economic policies and achieve common development.The disadvantage of this paper is that,in discussing the relationship between inflation and economic growth,besides the impact of inflation on economic growth,the policies introduced when inflation occurs will also have a great impact on economic growth.In this paper,those two aspects are regarded as the impact of inflation on economic growth.,which will cause,if the government finds better measures to deal with high inflation,the accuracy of the correlation between inflation and economic growth that this paper has drawn will greatly descend.