Structural Changes and Regional Disparity in China's Inflation

The inflation problem in China has attracted a great deal of international attention in recent years. This paper examines the time series properties of China's CPI series. It is found that the overall inflation series and the inflation of food, tobacco, clothes, urban transport and urban housing are not persistent. Structural breaks in inflation are found in 2003 and 2004. The degree of rural-urban inflation disparity in China is also investigated. We find evidence that rural residents experience higher inflation than their urban counterparts.