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Inflation in China—from Macroeconomics Perspective

2020-06-02 来源: 51Due教员组 类别: Report范文

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下面为大家整理一篇优秀的essay代写范文 -- Inflation in China—from Macroeconomics Perspective,文章讲述改革开放以来,中国经济有了长足发展。在针对市场经济体制的改革中,中国的宏观经济规模和质量都急剧增长。随着近几年国内生产总值的增长,中国大宗商品价格连年上涨,引起了对通货膨胀的高度关注。

2008年金融危机以来,CPI连续几年上升,这给宏观经济带来了压力。通货膨胀具有实质性影响,一方面适当的通货膨胀将促进经济发展,另一方面,过度的通货膨胀将严重影响经济。这将有助于决策者制定科学的宏观经济政策,推动经济健康持续发展,从而增强通胀对宏观经济的影响。


Inflation in China—from Macroeconomics Perspective

 

Abstract. Inflation nowadays is not only an economic problem, but also a sociology one. Inflation is gaining increasing attention in the days that the price of commodities in China rises gradually and rapidly. Inflation will effect citizens’ life while influence the national macro economy. In this case, analysis of inflation will help macro economy develops healthily and  continuously. This paper will put an emphasis on the affect of inflation on macro economy.

Key words: Inflation; macro economics; influence; countermeasures

1 Introduction

China's economy has developed dramatically after the reform and opening-up policy. During the reform which aimed at system of market economy, the macro economy in China grew drastically in both scale and quality. Along with the increase of GDP in the last few years, the commodities price in China rises in successive years, leading to the high attention on inflation.

Since the financial crisis in 2008, the CPI has risen in successive years, laying stress on the macro economy. Inflation has essential influence that appropriate inflation will promote the economy on one hand while excessive inflation will seriously impact the economy on the other hand.  It will help decision makers make scientific macro economics policies and drive the economy develop healthily and continuously to strengthen the influence of inflation on macro economy.
2 The Influence of Inflation in China
There are several important indicators to estimate the inflation: Consumer Price Index(CPI), Producer Price of Industrial Index(PPI), Corporate Goods Price Index(CGPI) and quantity of money(M1, M2).

From the perspective of CPI, the CPI has been rising up to 6.4% in June, 2011. Although  the authority has formulated policies to control the price, the index does not decreased obviously. PPI, a measure index of price change in the field of production and macro economy trend, has risen to 7.2% in 2011. The CGPI index has been going in a high position since June, 2011 to January, 2012(Dirk Kotze, 2013). To sum up, it can be easily seen that the pressure of inflation in China has been ascending.
2.1 The Influence of Inflation on Macro Economy

The influence of inflation on macro economy can be inspected in several aspects: accumulation of funds, price level, stagflation, investment, labor productivity and pattern of income distribution.

2.2  The Influence of Inflation on Accumulation of Funds

Inflation has a great impact on accumulation of funds. Under the inflation circumstance, government and enterprises will give their residents and staff subsidy to make up their loss in real life. This kind of distribution will reduce the accumulation of funds and effect the investment ability of enterprises eventually. Beside, the fear of inflation among people will lead to the squeeze of banks, decreasing the deposit in banks. The uncertainty of inflation will also complex the interest rate policy of central bank, which deteriorate the accumulation and optimization of funds.
2.3 The Influence of Inflation on Price Level

Rising prices are usual manifestations of inflation. However, it should be noticed that rising prices can be caused by many factors, while inflation is the most typical one. In a similar way, there are a lot of manifestations of inflation, and rising price is one of them. Generally, the higher degree of inflation, the faster the price rises. Nevertheless, price reform and other factors are difficult to be noticed, so we should take these into consideration while settling the problem of inflation.

2.4 Stagflation
Stagflation, high inflation rate accompanied by slow economic development, is caused by unscientific and deficient policies while fighting inflation, such as western countries in 1970s.

Precaution and judgment of stagflation are vital factors. We should use comparative static analysis to examine the entire economy operation rather than just picking a point. The persistence and complexity should be considered.

2.5 The Influence of Inflation on Investment

Real market price reflects real market resources, but twisty price cannot do it. Under the inflation circumstance, the market price will be twisted and mislead the market subjects, resulting in the waste. The dissymmetry among subjects will induce a new round of investment impulsion, which leads to the ineffective use of resources.
2.6 The Influence of Inflation on Labor Productivity

During inflation period, the only way to gain profit for entrepreneurs is to rise price, but rising price will bring the enterprises loss in the last. So the actual benefit of staff will be damaged and the unreasonable benefit distribution will impress the enthusiasm and lower the productivity afterwards.
2.7 The Influence of Inflation on  income distribution

The inflation makes the unequal income distribution more severe. The impact on low income family is immense because for those families, wage and other cash format are their only income, which shrink dramatically during inflation and lead to the huge loss. While for those rich families, despite cash, they still have land and other properties like capital, which appreciate during inflation. Therefore, the gap between the rich and the poor will be more severe.

3 Measures to Deal with Inflation in China

There are three monetary policy strategies to strengthen the control of inflation. First, money stock of credit and loan should be activated to promote use ratio of money. Second, financial institutions should deleverage to decrease the market risk. Third, the RMB interest rate system should be keep reforming and improving. The defective currency credit and loan mechanism, discordance between credit structure and macro economy development and even the lack of money in banks all reflect the flaw in Chinese market. The decision makers should adjust the credit structure to the real economy and enhance the credit and loan for middle and small-sized enterprises while improving the currency use ratio. Financial institutions should deleverage under the circumstance, because by levering, banks and other institutions make a lot of profit but bury hidden trouble at the same time. Only by deleveraging, will Chinese financial institutions decrease risk, fulfill long-term development, and complete RMB interest rate system. The inflation in China is caused by the unsound RMB interest rate system to a large extent. The appreciation of RMB brings huge stress on foreign trade enterprises, and seriously impact the international competitiveness, effecting the macro economy eventually. Therefore, the RMB interest rate system should be improved continuously.

What’s more, there are two fiscal policies to settle the Chinese inflation problem. First, taxation mechanism should be reformed. Second, public investment on people’s livelihood field should be strived. There are some unreasonable places in Chinese taxation mechanism, especially the individual income tax.  The tax is collected according to classification, which is unscientific because those who have higher income will pay lower taxes. Hence, the Chinese government should invest more in people’s livelihood and improve the power of consumption.

4 Conclusion

People are paying more attention on the inflation in the days that price keeps rising rapidly. Due to the serious impact of inflation on Chinese macro economy, strengthening the research of the impact and scientific control of inflation will be more significant. This paper analyze the influence of inflation on macro economy from six aspects and give several monetary policy and fiscal policy measures to solve the problem.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reference

Akerlof, George A., William T. Dickens, and George L. Perry. “The Macroeconomics of Low Inflation.” Brookings Papers on Economic Activity 1 (1996): 1-76.

Benabou, Roland. “Inflation and Efficiency in Search Markets.” Review of Economic Studies 59 (April 1992): 299-329.

Bils, Mark, and Peter J. Klenow. “Some Evidence on the Importance of Sticky Prices.” Journal of Political Economy 112 (October 2004): 947-985.

Blinder, Alan S., Elie R. D. Canetti, David E. Lebow, and Jeremy B. Rudd. Asking About Prices: A New Approach to Understanding Price Stickiness. New York, NY: Russell Sage Foundation, 1998.

Fortin, Pierre. “The Great Canadian Slump.” Canadian Journal of Economics 29 (November 1996): 761-787.

Golosov, Mikhail, and Robert E. Lucas Jr. “Menu Costs and Phillips Curves.” Journal of Political Economy 115 (April 2007): 171-199.

Ragan, Christopher. “On The Believable Benefits of Low Inflation.” Bank of Canada

working paper No. 98-15, September 1998.

Yun, Tack. “Optimal Monetary Policy with Relative Price Distortions.” American Economic Review 95 (March 2005): 89-109.

 

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