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| 1 |
ID:
170339
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| Summary/Abstract |
China's ‘New Normal’ has been much discussed in recent years. An important aspect of the New Normal is the growth slowdown from levels of around 10% per annum to a more modest 6 or 7%. Not surprisingly, there has been widespread discussion of whether the slowdown is permanent or not and, in either case, what the sources of the slowdown are. However, much of this discussion has been based on informal analysis of the data rather than formal econometric results. We make a move in the direction of formal empirical analysis of this issue by estimating and simulating a vector autoregressive (VAR) model which distinguishes between demand, supply and foreign shocks as possible drivers of changes in economic growth. We analyse both two-variable (growth and inflation) and three-variable (foreign growth, domestic growth and inflation) VAR models and identify demand, supply and foreign shocks, using a modification of the Blanchard-Quah identification procedure. In the two-variable model we identify two shocks (demand and supply) and find that the slowdown since the GFC has been mainly supply-driven. This conclusion is not changed when a foreign growth variable is added to the model and a foreign shock is allowed for – we find that demand continues to be of relatively little importance, that the foreign shock also makes little contribution to explaining the long-run growth decline in China which continues to be driven by long-term supply factors. This conclusion is robust to a number of alternative formulations of the model. Thus, the growth slowdown may, indeed, be characterised as the ‘New Normal’.
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| 2 |
ID:
121195
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| Publication |
2013.
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| Summary/Abstract |
In recent years there has been a great deal of interest in soaring food prices in India, as evidenced by wide discussions on causes of food inflation and its influence on near double-digit overall inflation in 2010 and 2011. This article examines the mix of drivers behind food price inflation through surveying recent evidence. Using this approach, this article demonstrates that the increase in demand for protein and vitamin-based high value food items has been the main driver of recent food inflation although supply shocks and institutional factors are important determinants of food inflation. These findings draw on the idea, as indicated by policy analysts, that finding proper policy response to rising food prices, mainly driven by increasing demand, will be a major challenge in India.
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