On Relationship Between Inflation and Inflation Uncertainty in China

摘要

We examine the relationship between inflation and inflation uncertainty in China using the asymmetric power GARCH (PGARCH) and ARMA-GARCH-M-L models that allow for simultaneous feedback between the conditional mean and variance of inflation. In our empirical work we use seasonally adjusted time series on China Consumer’s Price Index from January in 1990 to November in 2007. Through Granger-causality test we find new evidence that suggests positive inflationary shocks have stronger impacts on inflation uncertainty in China and illustrate its poficy implications.