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Frontiers of Economics in China

Front. Econ. China    2018, Vol. 13 Issue (3) : 458-483     https://doi.org/10.3868/s060-007-018-0022-4
Orginal Article |
Purchasing Power Parity and Price Fluctuations in China before July 1937
Liuyan Zhao1(), Yan Zhao2()
1. School of Economics, Peking University, Beijing 100871, China
2. School of Software & Microelectronics, Peking University, Beijing 100871, China
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Abstract

In this paper, we provide an empirical investigation of the purchasing power parity (PPP) hypothesis for China before July 1937. Using the monthly data from 1922 to 1937, we find clear and consistent evidence in favor of the purchasing power parity relationship. This naturally leads to the conclusion that the degree of Chinese market integration with the West was substantial before July 1937. These findings offer an empirical interpretation of the rise and fall of the Chinese price level during the Great Depression. It also has further implications of the impact of the American Silver Purchase Act of 1934 and the assessment of the 1935 currency reform on the Chinese economy.

Keywords purchasing power parity (PPP)      silver standard      market integration      1935 currency reform      deflation      inflation     
Issue Date: 30 September 2018
 Cite this article:   
Liuyan Zhao,Yan Zhao. Purchasing Power Parity and Price Fluctuations in China before July 1937[J]. Front. Econ. China, 2018, 13(3): 458-483.
 URL:  
http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0022-4
http://journal.hep.com.cn/fec/EN/Y2018/V13/I3/458
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