Research on the Correlation between Economic Growth and Inflation——An Empirical Analysis Based on VAR Model

Abstract

Economic growth and inflation are two important issues that the government needs to consider when making macro policies. Therefore, it is necessary to clarify the relationship and interaction mechanism between the two. This paper uses the data of Xinjiang and Xinjiang from 1978 to 2020, and conducts an empirical study on the relationship between the two by establishing a VAR model. Through a series of analysis, it is found that the relationship between economic growth and inflation in Xinjiang has shown differences in the past 42 years. In the case of Xinjiang, there are alternating positive and negative effects of economic growth on inflation, but there is no significant effect of inflation on economic growth. Combining the empirical findings with the theoretical analysis, this paper argues that the Xinjiang government can help maintain market stability and good macroeconomic operation by strengthening the monitoring of economic development and improving the predictability and effectiveness of price level regulation.