Are Chinese Growth and Inflation Too Smooth? Evidence from Engel Curves

Emi Nakamura · Jón Steinsson · Miao Liu

97 citations0/0 files storedAmerican Economic Journal Macroeconomics

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Monetary Policy and Economic Impact Historical Economic and Social Studies Economics of Agriculture and Food Markets

Abstract

China has experienced remarkably stable growth and inflation in recent years according to official statistics. We use systematic discrepancies between cross-sectional and time-series Engel curves to construct alternative estimates of Chinese growth and inflation. Our estimates suggest that official statistics present a smoothed version of reality. Official inflation rose in the 2000s, but our estimates indicate that true inflation was still higher and consumption growth was overstated. In contrast, inflation was overstated and growth understated during the low-inflation 1990s. These patterns hold for the food Engel curve, and for numerous other categories, such as grain as a fraction of food. (JEL C82, E21, E23, E31, O11, P24)

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1980An Almost Ideal Demand System 2010Imported Intermediate Inputs and Domestic Product Growth: Evidence from India 19713. Hedonic Price Indexes for Automobiles: An Econometric Analysis of Quality Change 1996The Demand for Food and Calories 2001What is happening to China's GDP statistics?2003A Reconsideration of Hedonic Price Indexes with an Application to PC’s 2003Sources of Bias and Solutions to Bias in the Consumer Price Index 2001Using Engel's Law to Estimate CPI Bias

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