Is there inflation in China? Evidence by a unit root approach

In this paper, we developed the recursive unit root tests proposed by Phillips et al. (2013) to identify the beginning and end of speculative bubbles in Chinese consumer price index (CPI). This method is best suited for practical implementation and delivers a consistent date-stamping strategy to identify the multiple bubbles. The results show four inflationary periods exist in China from 2006-2014 based on CPI bubbles in urban and rural regions. The bubbles are similar between rural and urban regions, indicating consistency with the law of one price. Our test can analyze inflation's fluctuations from the repetition of the CPI bubble.