Empirical Reasearch On The Nonlinearity Of Phillips Curve In China Based On The LSTR Model

Phillips curve is one of the important empirical theories in macroeconomics.It mainly describes the correlation between wage rate and unemployment rate,inflation rate and economic growth rate.Since this theory was put forward,it has been constantly revised and perfected in the voice of doubts from scholars.It can not only describe the short-term dynamic characteristics of inflation,but also plays an important role in the study of monetary policy transmission mechanism.The specific form of Phillips curve has always been the focus of domestic and foreign scholars'research,'mainly from the influencing factors of inflation-output gap,inflation expectation,inflation inertia and different external shocks,through the construction of different models to fit the Phillips curve suitable for the current economy.The model provides a reference for monetary authorities to formulate monetary policy.Phillips curve was originally proposed in the form of non-linear,but most of the studies are based on the stable operation of economic environment and construct a linear Phillips curve model on the premise of linear hypothesis.This model lacks dynamics and is inconsistent with the real economy.Moreover,in recent years,China's economic growth has slowed down and is facing structural reform.The change of economic structure indicates that the shape of the Phillips curve has changed,and the reflection coefficient of the relevant variables is also changing structurally.Therefore,many scholars began to use different empirical analysis methods to explore the non-linear Phillips curve model.Based on the New Keynesian hybrid Phillips curve with high-order lag,and introducing the external shock variable of foreign exchange occupancy/base currency,this paper uses the data from the first quarter of 2000 to the fourth quarter of 2018,and uses the Logical Smoothing Transfer Model(LSTR)to explore the existence of non-linearity of Phillips Curve in China.The form of non-linear Phillips curve gives relevant policy recommendations.In this paper,the research on the non-linear eharacteristics of Phillips curve in China is divided into five parts.The first part is the introduction,which introduces the research background and significance of this paper,summaries the research of Philips curve and its non-linearity at home and abroad,explains the research framework and research methods of this paper,and finally points out the possible innovation and shortcomings of this paper.The second part is about the related theories of Phillips curve.It introduces the original Phillips curve,the revised Phillips curve,the additional expected Phillips curve and the modern Phillips curve in turn.It further explains that Phillips curve has three forms of expression,and because of the availability of data,the most important one is that Phillips curve has three forms of expression.The Phillips curve expressed by inflation rate and economic growth rate is commonly used.On this basis,the basic model of the New Keynesian Phillips curve,the new Keynesian mixed Phillips curve model and the derivation process of the mixed Phillips curve model with high-order lag teram are mainly introduced,and the non-linearity is constructed for the following text.Phillips curve model lays the theoretical foundation.The third part is the selection of variables and the test of data.It introduces the data sources of variable inflation rate,expected inflation,output gap and foreign exchange occupancy/base currency involved in the construction of non-linear Philips curve model,and the specific processing methods.It also makes descriptive statistical analysis of these indicators,and then in order to prevent false returns,unit root test and cointegration test were done for the variables in turn.The fourth part is the construction and fitting of the non-linear Phillips curve model.Firstly,the characteristics and testing steps of the smooth transformation regression model in the non-linear research are briefly introduced.Then,on the basis of LSTR2 model,a non-linear Phillips curve model with inflation expectation as the transformation variable is established,the national Phillips curve has non-linear characteristics,and gives an economic explanation for the test results of the model.The fifth part is the conclusion and policy recommendations of the paper.Empirical results show that the new Keynesian hybrid Philips curve model with high-order lag including foreign exchange occupancy/base currency has a non-linear form of LSTR2,in xvhich inflation expectation is the conversion variable.Output gap,inflation expectation,inflation inertia and foreign exchange occupancy/base currency have significant non-linear effects on inflation rate.The two position parameters of inflation expectation are 2.4%and 6.14%respectively.When inflation expectation is greater than 2.4%and less than 6.14%,the Phillips curve model is in a low mechanism.The influence of each variable on inflation rate is mainly reflected in the linear part.There is a negative correlation between output gap and inflation,and inflation expectation and inflation.There is a positive eorrelation between inflation.Inflation rates in lagging period one and three have a positive effect on inflation.Inflation rates in lagging period two and lagging period four have a negative effect on inflation.foreign exchange occupancy/base currency has a positive effect on inflation,but the coefficient of effect is smaller than other variables.When 2.4%or more than 6.14%,the Phillips curve is in a high mechanism.Variables have both linear and non-linear effects on inflation.Output gap has a positive effect on inflation.Inflation expectation has a positive effect on inflation.Inflation rates lagging one and three periods have a positive effect on inflation.The positive effect is weakened,and the two-period lagging inflation rate has a positive impact on inflation.The foreign exchange occupancy/base currency is still positively correlated with inflation,but it is weaker than the linear part.The innovations of this paper are as follows:using the mixed Phillips curve model with high-order lag and introducing the foreign exchange occupancy/base currency as an external shock variable,it comprehensively covers the influencing factors of China's inflation xate;LSTR2 model is used to study the non-linear characteristics of Phillips curve in China,Iogical smoothing transformation model with two position parameters can better fit the frequently ehanging Phillips curve.The shortcomings of this paper:The empirical study in this paper uses time series data with small sample size.When introducing extermal shoclcs,it only involves foreign exchange occupancy/base currency,without considering other external shocks.