Original scientific paper
https://doi.org/10.1080/1331677X.2022.2080730
Dynamic characteristics of China’s inflation: a two-country DSGE model based on a multi-level vertical industrial structure
Chuan Wang
Qiuge Yao
Abstract
We establish a two-country DSGE model with a vertical production
chain to study the inflation dynamics in China. By introducing
multiple layers of price stickiness and shadow economy
production to the vertical industrial chain, our model helps to
explain dynamic characteristics of inflation. In our model, shocks
can not only affect inflations by passing down the production
chain through cost channels, but also in the reverse way due to
the intermediate demand effect and the investment costs effects.
After calibrating and estimating the parameters, the simulation
results show that more than 90% of inflation fluctuations in China
can be attributed to domestic shocks, among which the domestic
monetary shock and final sector technology shock are the most
influencing factors in explaining China’s inflation dynamics
Keywords
Inflation; vertical industry chain; multi-layer price stickiness; DSGE modelling
Hrčak ID:
304277
URI
Publication date:
31.3.2023.
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