The Nonlinear Threshold Relationship Between China's Inflation And Economic Growth

It is that central goal of macroeconomic policy in each country that economic growth,price stability,full employment and balance of income and expenditure remain the central goal of macroeconomic policy in each country,so that the central goal is of great significance to national development.As China's economy is undergoing transformation,its economic growth is gradually slowing down,and the country's development is facing difficulties.At the same time,inflation also affects the development of macro economy.Therefore,the analysis of the relationship between inflation and economic growth is conducive to the rational planning of inflation and economic growth,the realization of sustained economic growth and the maintenance of price stability,etc.Therefore,understanding the relationship between inflation and economic growth is of vital importance to social development.This paper aims to analyze the relationship between inflation and economic growth,and the difficulty of analyzing the relationship between inflation and economic growth mainly lies in the determination of the number of threshold effect.First of all,this paper establishes the rebenchmarking extreme difference(R/S)analysis method to test the nonlinear relationship between inflation and economic growth.Then this article through the establishment of a parameter model to determine the threshold of the relationship between inflation and economic growth,in the use of nonparametric model,the semiparametric model analyzes the threshold number between inflation and economic growth,explain the endogenous variables in the model problem can make the model results are unreliable,so this article for further related variables for weak tool inspection and Sargan J-test and Wu-Hausman F-test,inspection,and through the inspection results to choose the appropriate tools on the basis of variables,Then,the instrumental variable-semi-parametric model is established to analyze the number of thresholds between inflation and economic growth,and finally determine the number of thresholds between inflation and economic growth.Finally,based on the determination of threshold value,the threshold regression model of two-region system is established in this paper.The threshold regression model is estimated by using nonlinear least square method,and the detailed relationship between inflation and economic growth is determined.Based on this research result,relevant policy recommendations are proposed.The empirical results show that there is a significant non-linear threshold relationship between inflation and economic growth,with a threshold level of 3.9%.Besides,there is surplus after the negative effect of high inflation on economic growth is offset by the positive effect of low inflation on economic growth,and the relationship between inflation and economic growth is presented as an asymmetric inverted "U" structure.That is,when the inflation rate is lower than 3.9%,the inflation rate will slowly promote economic growth or steady development.When the inflation rate is higher than 3.9%,inflation will hinder the benign development of the economy and even undermine the normal development of the economy.Moreover,the destructive effect is stronger than that of the low inflation range.And based on the research results,it is found that increasing investment and exports have a significant positive effect on China's economic growth.At present,China is in an important stage of economic structure transformation.A detailed understanding of the relationship between inflation and economic growth will help formulate relevant policies to help China's economic development.China's economic growth rate in 2016 and 2017 was 6.7 percent and 6.8 percent,respectively,a slowdown from previous years.If China is to build the" "comprehensive well-off society" "proposed by Deng Xiaoping in 2020,the country's economic growth rate should remain at around 6.5 percent,with no significant improvement since 2018.According to the results of this study found that the current low inflation environment in China,through the improvement of inflation to slow economic growth effect may not be very significant,therefore in this paper,suggestions from other three aspects to improve the national economic development:one is the expansion of investment,improve the business environment,creating a favorable investment environment,to attract capital entry.Second,open the door of China to the outside world,actively carry out trade activities with other countries,actively carry out free trade agreement negotiations with other countries.