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Paul G. Egan

Email Address: 
paul.egan@ul.ie
Supervisor(s): 
Dr. Anthony Leddin
Working Title of Thesis: 
“Essays on Inflation, Output & Monetary Policy in Post Reform China”
Abstract: 

The Chinese economy has experienced tremendous transformation and record-high growth during the last three decades. Having overtaken Japan as the world’s second largest economy in 2010, it has taken a prominent role on the world stage. Given its importance to the global economy and its extensive trade relations with the United States and Europe, the dynamics of Chinese macroeconomic variables have become hugely significant.

As a result of increased integration into the global economy and continuing domestic price liberalisation, prices in China are increasingly market determined. Therefore, understanding the dynamics of inflation, output and monetary policy is important, both in theory and in practice, especially for central banks in the conduct of monetary & economic policy. Since the start of its reform period in the late seventies, the Chinese economy has seen two episodes of high inflation where annual changes in the consumer price index have exceeded 25% (1988-89 & 1994-95), both of which were followed by abrupt slowdowns in output. Movement in the price level has huge significance both for the Chinese and international market. Besides the social unrest that rising prices often causes in China, inflation also endangers China’s status as the low-cost workshop of the world. Contractionary policies to fight inflation would obviously cause the Chinese economy to falter and the effects would be felt worldwide.

This research will attempt to provide a comprehensive analysis of the dynamics of inflation, output and monetary policy reactions in the Chinese economy through a Markov switching version of a New Keynesian Model (NKN). The NKM of monetary policy has become a standard tool for the analysis of inflation, output and policy dynamics. This model consists of a Phillips curve, an IS curve and a monetary policy or interest rate rule.

The Chinese economy has changed drastically over the last three decades so the question arises as to whether or not the dynamics of these variables have also changed over this time period and what are the implications of such a change. A model of the Chinese economy needs to take account of these changes by allowing multiple structural breaks in the time series. This thesis will apply the non-linear Markov switching methodology to a NKM framework in order to fully capture non linearities associated with the structural changes in the Chinese economy during and after the reform period.

Publications/presentations to date: 

Peer-Reviewed Journals

Egan, P.G. & Leddin, A.J. 2014. Monetary Policy Transmission in China, The Journal for Development & Leadership,(3)2, forthcoming, December 2014.

Manuscripts Under Review/Preparation

Egan, P.G. & Leddin, A.J. 2014. A Markov Switching Monetary Policy Rule for China, to be submitted to Emerging Markets Review by October 2014.

Egan, P.G. & Leddin, A.J. 2014. Inflation Dynamics in China – A Markov Switching Phillips Curve Approach, under review at China Economic Review.

Conference Papers

Egan, P.G. & Leddin, A.J. 2014. Analysing Post-Reform Macroeconomic Fluctuations in China using Markov Switching Models, 25th Chinese Economic Association (UK) Annual Conference, School of Business, Economics and Law University of Gothenburg, September 2014.

Egan, P.G. & Leddin, A.J. 2014. A Markov Switching Phillips Curve for China, The 2014 Chinese Economist Society North America Conference, Purdue University, Indiana, March 2014. Egan, P.G. & Leddin, A.J. 2013. Inflation Determination in Ireland, 76th International Atlantic Economic Conference, Philadelphia, Pennsylvania, October 2013.

Egan, P.G. & Leddin, A.J. 2013. Inflation Dynamics in China – A Markov Switching Phillips Curve Approach, 10th Annual Irish Society of New Economist Society Conference, National University of Ireland, Maynooth, September 2013.

Egan, P.G. & Leddin, A.J. 2012. Analysing Post-Reform Macroeconomic Fluctuations in China using Markov Switching Models, 9th Annual Irish Society of New Economist Society Conference, University College Cork, August 2012.

Photo: 
Keywords: 
China, Output, Inflation, Monetary Policy, Markov Switching
Details of any scholarships/funding received: 
Kemmy Business School Study in Asia Scholarship, Research visit at Tongji University, Shanghai, 2014. Government of Ireland – Irish Research Council Postgraduate Scholarship, 2012- 2014. Paul Tansey Postgraduate Research Scholarship in Economics, The Kemmy Business School & The Irish Times, 2010 – 2013.
First Name: 
Paul G.
Last Name: 
Egan