Alternative strategies to change negative output gaps rate in China
Abstract
Purpose
The purpose of this paper is to find alternative strategies to change negative output gaps in China.
Design/methodology/approach
A path Philips curves approach is proposed to investigate output gaps, which develops hybrid Philips curves with the control variables of money, house prices and interest rates.
Findings
An alternative strategy to stop the decline in output gaps rate is to perform interest rate, house price, and money growth rate about 3, 1 and 15 percent, respectively. The results also indicate that only one of monetary increase, changes in interest rates, and house price adjustments are difficult to change the negative output gap.
Practical implications
Alternative strategies cannot only change the negative output gap, but also succeed in pushing the inflation rate down to 3 percent.
Originality/value
This study provides a new path Philips curves to simulate how the macroscopic control variables influence output and inflation. It provides a useful insight for stopping the decline in output gaps.
Keywords
Acknowledgements
This paper is supported by the National Natural Science Foundation of China (70973110).
Citation
Xu, B. and Hu, X. (2014), "Alternative strategies to change negative output gaps rate in China", Management Decision, Vol. 52 No. 7, pp. 1319-1329. https://doi.org/10.1108/MD-11-2012-0789
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited