The Study on the Influence of Terms of Trade on Regional Inflation – Based on the Mixed NKPC Model Under the Opening Economy Condition
School of Statistics, Huaqiao University
No.668 Jimei Avenue, Jimei District, Xiamen, Fujian 361021, China
Based on the panel data from 1990 to 2018, this paper analyzes the regional difference in the impact of changes in price terms of trade and changes in income terms of trade on inflation by establishing the Hybrid NKPC model under the open economy. The empirical results show that the changes in price terms of trade and the changes in expected price have a significant negative and positive impact on the current inflation rate for each region. The changes in income terms of trade and the changes in expected income terms of trade have significant negative and positive effects on the inflation for each region. There is a significant difference in the degree of impact on the regional inflation and the degree of impact will further strengthen. Therefore, the change in terms of trade is an important determinant of the level and trend of domestic inflation in both the short term and long term.
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