During the past two decades, China’s economy has been growing rapidly, so has the inflation rate. This research focuses on the relationship between China’s inflation rate and economic growth. There are three sub-questions, consisting of whether there is a significant correlation between China’s inflation and economic growth, whether there is a cause-and-effect relationship between China’s inflation and economic growth, and how time factor influences their relationship. The result will be helpful for the government to find a way in order to achieve high economic growth and low inflation.
After reviewing empirical literature, we know that as the dada and methods differ, different researchers have generated different conclusions regarding the relationship between inflation and economic growth. In this research, we use CPI to measure inflation rate and GDP growth rate to measure economic growth rate. All the data are collected from the National Bureau of Statistics of China. We use three methods to analyse data, including the Correlation Coefficient test, the Granger Causality test as well as the VAR model analysis. The result turns out to be that there is a bidirectional causality relationship between inflation and economy growth, but the relationship is not so strong because CPI is not solely driven by GDP. At last, we have come up with three recommendations: firstly, change their model of economic development; secondly, use the monetary policies; thirdly, monitor and predict people’s expectation of inflation.
Table of Contents
- 1. Introduction
- 2. Purpose of the Research
- 2.1 Background Information
- 2.2 Problem Statement and Research Sub-questions
- 2.3 Significance of the Problem
- 2.4 Aim and Objectives
- 3. Research design
- 3.1 Literature Review
- 3.2 Conceptual Framework
- 3.3 Hypotheses
- 3.4 Variables
- 3.4.1 Inflation Rate
- 3.4.2 Economic Growth Rate
- 3.5 Methods of Analysis
- 3.5.1 Statistical Tools
- 3.5.2 Correlation Coefficient Test
- 3.5.3 Granger Causality Test
- 3.5.4 VAR Model Analysis
- 3.6 Deviations
- 4. Data
- 4.1 Source and Data Collection Method
- 4.2 Sample Design
- 4.3 Problem Encountered with Data Collection
- 5. Analysis and Results
- 5.1 Correlation Coefficient Test
- 5.2 Granger Causality Test
- 5.3 VAR Model Analysis
- 6. Conclusion
- 7. Recommendation
Objectives and Key Themes
This research investigates the relationship between China's inflation rate and economic growth from 1979 onwards. The primary objective is to determine if a significant correlation and/or causal relationship exists between these two variables, and how the time factor influences their interplay. The findings aim to provide insights for government policy aimed at achieving sustained economic growth with low inflation.
- The correlation between China's inflation rate and economic growth.
- The causal relationship (if any) between China's inflation and economic growth.
- The impact of time as a factor in the relationship between inflation and economic growth.
- The methodologies used to analyze the relationship between inflation and economic growth.
- Policy recommendations based on the research findings.
Chapter Summaries
1. Introduction: This chapter introduces the research topic—the relationship between China's inflation and economic growth. It provides a brief overview of the research's purpose and structure, outlining the subsequent sections that detail the research plan, data collection, analysis, results, and concluding recommendations.
2. Purpose of the Research: This section lays the groundwork by providing background information on China's economic development since 1949, highlighting periods of rapid growth, high inflation, and government interventions. It establishes the problem statement and research sub-questions, emphasizing the significance of understanding the interplay between inflation and economic growth for effective policymaking. The aim and objectives of the research are clearly defined, setting the stage for the subsequent methodological and analytical sections.
3. Research design: This chapter details the research methodology. It outlines the literature review, conceptual framework, hypotheses, and variable definitions (inflation and economic growth rates). Crucially, it describes the chosen analytical methods: correlation coefficient test, Granger causality test, and VAR model analysis. The chapter also addresses potential deviations from the planned methodology.
4. Data: This chapter focuses on the data used in the research. It specifies the source (National Bureau of Statistics of China), data collection method, sample design, and any challenges encountered during data acquisition. This section is essential for understanding the reliability and validity of the subsequent analysis and results.
5. Analysis and Results: This chapter presents the findings of the empirical analysis using the methods outlined in Chapter 3. It details the results of the correlation coefficient test, Granger causality test, and VAR model analysis. The presentation likely includes statistical tables and charts to visualize the relationships between inflation and economic growth.
7. Recommendation: This chapter offers policy recommendations based on the research findings, suggesting strategies for the Chinese government to balance economic growth with low inflation. These recommendations may involve adjustments to economic development models, monetary policy adjustments, and proactive inflation expectation management.
Keywords
China, economic growth, inflation, CPI, GDP, correlation, Granger causality, VAR model, monetary policy, economic development.
Frequently Asked Questions: China's Inflation Rate and Economic Growth
What is the main topic of this research paper?
This research paper investigates the relationship between China's inflation rate and economic growth, specifically examining the correlation and causal relationship between these two variables from 1979 onwards. It aims to provide insights for government policy aimed at achieving sustained economic growth with low inflation.
What are the key objectives of the research?
The primary objective is to determine if a significant correlation and/or causal relationship exists between China's inflation rate and economic growth. The research also seeks to understand how the time factor influences this relationship and to offer policy recommendations based on the findings.
What methodologies are used in this research?
The research employs several statistical methods to analyze the data, including a correlation coefficient test, Granger causality test, and Vector Autoregression (VAR) model analysis. These methods are used to assess both the correlation and the potential causal relationship between inflation and economic growth.
What data is used in the analysis?
The data used comes from the National Bureau of Statistics of China. The research specifies the data collection method and sample design, also addressing any challenges encountered during data acquisition.
What are the key findings of the research (in general terms)?
The research presents the results of the correlation coefficient test, Granger causality test, and VAR model analysis, likely including statistical tables and charts visualizing the relationships between inflation and economic growth. Specific findings regarding correlation and causality are detailed within the "Analysis and Results" chapter.
What are the key themes explored in the research?
Key themes include the correlation between China's inflation rate and economic growth, the causal relationship (if any) between these variables, the impact of time on their relationship, the methodologies used for analysis, and policy recommendations based on the findings.
What is the structure of the research paper?
The paper follows a standard structure including an introduction, a detailed methodology section, data description, analysis and results, conclusions, and recommendations. Specific chapters cover background information, problem statement, literature review, conceptual framework, hypotheses, variable definitions, and a thorough discussion of the employed statistical methods.
What are the policy implications of this research?
The concluding chapter provides policy recommendations for the Chinese government on how to balance economic growth with low inflation. These may involve adjustments to economic development models, monetary policy, and proactive inflation expectation management.
What are the keywords associated with this research?
Keywords include China, economic growth, inflation, CPI, GDP, correlation, Granger causality, VAR model, monetary policy, and economic development.
- Quote paper
- Raymond Cook (Author), 2011, Analysis of Economic Growth & Inflation, Munich, GRIN Verlag, https://www.grin.com/document/215677
