MODELING the PHILLIPS CURVE in CHINA: A NONLINEAR PERSPECTIVE

Lingxiang Zhang*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    8 Citations (Scopus)

    Abstract

    This paper investigates the nonlinear dynamics of the inflation-output type of Phillips curve based on a multiple-regime smooth transition regression model using data from China. The empirical results indicate significant nonlinearities in China's Phillips curve. The relationship between inflation and output can be modeled by a four-regime smooth transition regression model in which the responses of inflation to output depend on both inflation and economic growth rates. The inflation-output type Phillips curve may be positively sloped, negatively sloped, or even vertical in the short term, depending on different business cycles. Furthermore, we analyze business cycle fluctuations based on the nonlinear Phillips curve, indicating a coexisting zone of stable inflation rate and rapid growth rate.

    Original languageEnglish
    Pages (from-to)439-461
    Number of pages23
    JournalMacroeconomic Dynamics
    Volume21
    Issue number2
    DOIs
    Publication statusPublished - 1 Mar 2017

    Keywords

    • Business Cycle
    • Multiple-Regime Smooth Transition Regression Model
    • Phillips Curve

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    Zhang, L. (2017). MODELING the PHILLIPS CURVE in CHINA: A NONLINEAR PERSPECTIVE. Macroeconomic Dynamics, 21(2), 439-461. https://doi.org/10.1017/S1365100515000577