Research On Impacted Factors Of Inter-Provincial Inflation Differentials In China

Inflation is a sustained, widespread and significant increase in the general price level of goods and services in an economy over a period of time, an important object that policy makers and economists concerned, and one of the important goals of government macro-control. During the 22 years that from 1993 to 2014, the national inflation rate was above 7 percent from 1993 to 1996, about 5 percent in 2007, 2008 and 2011, and below 3.5 percent in the remaining 15 years. It shows that the national macro-control policies played a role in suppressing inflation in recent years. But inflation of each province in China is different. Although inter-provincial inflation differentials has received some concerns, few studies have focused on the inter-provincial inflation differentials in China. Therefore the paper analyzes the phenomenon and reason of inter-provincial inflation differentials.The paper first describes the necessity of studying inter-provincial inflation differentials and research status of domestic and broad. Then the paper summarizes the theories about the causes of inflation differentials and the Phillips curve theory development. Make statistical description of the inter-provincial inflation differentials and analysis the convergence of inter-provincial inflation differentials in from the whole, region, time-varying angle respectively. Based on modern Phillips curve, the paper establishes dynamic panel data models and analyzes impact factors of inflation differentials by one-step system GMM respectively, which include lagged inflation differentials, output gap differentials, trade liberalization differentials, government spending differentials, nationalization extent differentials, transportation conditions differentials, labor productivity growth differentials and financial efficiency differentials.According to the empirical results, it can be concluded that the lagged inflation differentials, output gap differentials, government spending differentials and nationalization differentials have a positive impact on inflation differentials; trade liberalization differentials, labor productivity growth differentials of primary and second industry have a negative impact on inter-provincial inflation differentials; transportation conditions differentials' impact on inflation is shaped by inverted U-shaped; cross-term of labor productivity growth differentials and financial efficiency differentials has a positive impact on inflation differentials, namely, financial efficiency helps to increase labor productivity growth's inhibitory effects on inflation.Finally, according to the empirical results, the paper puts forward policy recommendations: implementing differentiated monetary policy and fiscal policy, improving openness, financial efficiency, productivity levels and the degree of marketization, increasing the highway, railway and other infrastructure construction are good for reducing the inter-provincial inflation differentials, which can promote regional economic balanced development.