Internet Development and Inflation：Theory and Evidence

SU Zhi-fang1，CHEN Yu-lian2 and GUO Qian-qian1

（1.School of Economics and Finance，Huaqiao University ，Quanzhou 362000，Fujian，China；2.Quanzhou Transportation

Investment Limited Liability Company，Quanzhou 362000，Fujian，China）

Abstract：Under the context of the digital economy，effectively identifying the intrinsic logic of Internet development's impact on inflation is crucial to achieving China's policy goals of stable growth and inflation prevention. Building upon the theoretical foundation of the impact of Internet development on inflation ，the authors introduce an index of Internet development level into the hybrid New Keynesian Phillips Curve model ，and empirically test the impact of Internet development on inflation. Verified by the generalized method of moments estimation model ，the results show that Internet development suppresses inflation，and this conclusion remains robust after the substitution of core explanatory variables. Further employing the SVAR model identifies the dynamic characteristics of Internet development's impact on inflation ，the results show heterogeneity in the short- term and long- term effects of Internet development on inflation ，with Internet development suppressing inflation in the short term but promoting it in the long term，and Internet development has become one of the significant factors in explaining inflation changes in China. Therefore，China should fully utilize the development of the Internet to regulate and optimize the supply- demand balance ，strengthen the construction of inflation monitoring and early warning mechanisms ，refine monetary policy tools，and enhance their specificity and flexibility.

Key words：inflation；Internet development；the new Keynesian Phillips curve；SVAR model