دانلود رایگان مقاله فرضیه کسادی جهانی

Abstract

This paper evaluates the global slack hypothesis that economic globalization has increased the role of global factors in the inflation process in China. Towards that end, we augment and estimate conventional Phillips curve inflation equations by incorporating global economic slack that is obtained through China's eighteen major trading partners in the world. Empirical results with quarterly data spanning from 1995 to 2012 provide evidence in favor of altering the domestic Phillips curve to include global slack as an additional driving variable for inflation. The findings indicate that the Chinese central bank needs to react to developments in global economic slack.

6. Conclusions

The global dimension of domestic inflation is attracting attention from both academics and policymakers. Globalization may have altered short-run inflation dynamics through various channels. However, verifying the effect of globalization on inflation has proven challenging, and the existing literature has provided mixed results for industrial countries. There is little empirical evidence on the global slack hypothesis for developing countries. This paper aims to contribute to a strand of the empirical international macro-literature that has investigated the empirical relevance of the global slack hypothesis in recent years (also to the literature on China and its economy). The empirical approach of the paper follows in the tradition of the existing literature, but proposes a different strategy for the evaluation of the global slack hypothesis focusing on the experience of one country, China. China's emergence as a major player in the global economy over the past 20 years has been viewed as an essential part and a catalyst of this new wave of globalization. So, as our argument goes, Chinese inflation dynamics should have become more responsive to slack from its major trading partners according to the global slack hypothesis. We evaluate the hypothesis in a traditional Phillips curve framework. Traditional studies using such a framework typically explain inflation with domestic demand and supply conditions such as the output gap and cost push terms capturing productivity developments, but neglect that these factors are not only determined nationally but also globally. Our empirical investigations provide robust evidence that inflation in China responds significantly to the global slack over the period from 1995 to 2012. This finding indicates that the prescription that central banks should specifically react to developments in global economic performance is justified for China. The finding also indicates that the low and stable inflation period in China over the past decade may be attributed to the rising globalization of Chinese economy through which China benefited from the stable economic slack in its trading partners.