From the General to the Specific : Modelling Inflation in China

This article uses automatic model selection procedures, based on the general-to-speci fic approach, to investigate inflation in China. A novelty of this article is the use of a technique called impulse indicator saturation which allows us to uncover instabilities and to specify a very general model and select down to a more speci fic model that best explains inflation in China. By and large, our fi ndings suggest that China has been able to insulate itself against shocks from the US, although (maybe surprisingly) monetary growth in Europe seems to have an eff ect. Nonetheless, the main factors impacting Chinese inflation appear to be domestic, namely GDP growth and money growth