U.S., not China, is culprit of global deflation, inflation 1

YANG Zihui

Lingnan College, Sun Yat-Sen University

 
Abstract:

This paper is an outcome of comprehensive and systematic research on whether China exports deflation and inflation using the newly developed DAG technique. Our results indicate that in the international transmission of inflation, the United States, as the world’s largest economy, plays a dominant role. In contrast, during both deflation and inflation periods, China has a minimal impact on the price levels of major trading partners. Thus China is not to be blamed for global deflation or inflation. This research has made use of DAG and some other techniques to yield reliable and reasonable conclusions.

Key words: export deflation, export inflation, Directed Acyclic Graphs (DAG), generalized forecast error variance decomposition

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