Is Inflation a Fiscal Phenomenon in China? A Time- Varying Parameter Study from Perspective of Fiscal Expenditure

This paper studies w hether inflation is a fiscal phenomenon or not w ith a TVP- VAR model. The results show that government expenditure and CPI have positive relationship in general after controlling the influence of money supply and business cycle. It is unstable in the short run but is very significant in the long run. Furthermore,the fiscal expenditure plays very important role in the price rising during2010. The impact of active fiscal policy introduced in 1998 on CPI is greater in the short run,w hile the impact of active fiscal policy introduced in 2008 on CPI is more obvious in the medium and long run. M eanw hile,different types of expenditures have obvious different influences on CPI. Thus,inflation is not only a monetary phenomenon,but also a fiscal phenomenon. The findings help to further understand itu0027s occurrence of policy origin.