Stabilizing inflation expectations in China: Does economic policy uncertainty matter?

Siming Liu, Mengxin Wang, Aaron Tan

Research output: Contribution to journalArticle

Abstract

In this paper, we evaluate the impact of economic policy uncertainty shocks on inflation expectations in China by using a MF-VAR approach. We find that China’s inflation expectations are sensitive to policy-related uncertainty shocks. Meanwhile, there exist heterogeneous impacts of national economic policy uncertainty shocks on inflation expectations in China. Overall, the inflation expectations in China rise in response to the European, Japanese and China’s own uncertainty shocks. Whereas, the reaction of the inflation expectations in China to the uncertainty shocks made by both the US and BRICS (except China and South Africa) is negative. The results also reveal that the policy-related uncertainty shocks are dominant driving force of the inflation expectations in China especially during the post-crisis period. In addition, the contribution of China’s domestic uncertainty shocks is remarkably higher than that of foreign uncertainty shocks.
Original languageEnglish
Pages (from-to)429-441
Number of pages13
JournalGreen Finance
Volume1
Issue number4
DOIs
Publication statusPublished - 16 Dec 2019

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Economic policy
China
Inflation expectations
Policy uncertainty
Uncertainty
South Africa
Driving force

Cite this

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title = "Stabilizing inflation expectations in China: Does economic policy uncertainty matter?",
abstract = "In this paper, we evaluate the impact of economic policy uncertainty shocks on inflation expectations in China by using a MF-VAR approach. We find that China’s inflation expectations are sensitive to policy-related uncertainty shocks. Meanwhile, there exist heterogeneous impacts of national economic policy uncertainty shocks on inflation expectations in China. Overall, the inflation expectations in China rise in response to the European, Japanese and China’s own uncertainty shocks. Whereas, the reaction of the inflation expectations in China to the uncertainty shocks made by both the US and BRICS (except China and South Africa) is negative. The results also reveal that the policy-related uncertainty shocks are dominant driving force of the inflation expectations in China especially during the post-crisis period. In addition, the contribution of China’s domestic uncertainty shocks is remarkably higher than that of foreign uncertainty shocks.",
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Stabilizing inflation expectations in China : Does economic policy uncertainty matter? / Liu, Siming; Wang, Mengxin; Tan, Aaron.

In: Green Finance, Vol. 1, No. 4, 16.12.2019, p. 429-441.

Research output: Contribution to journalArticle

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