The Dynamic Characteristics And Causes Of Inflation Rate In Open Economy

Infation always is a hot topic in different economic sectors. Controlling inflationis the mainly problem for a Country.For central banks, inflation is the main referenceindicators for macroeconomic management and make macroeconomic policies, socomprehensive grasp of the dynamic characteristics and the causes of inflation,central bank can make more practical macroeconomic regulation; For customers, learnmore dynamics characteristics and the causes of inflation can help them grasp thechanging disciplines of inflation,then help them have a rational forecast for the futureprices, which can improve the effectiveness of the monetary policy; For companys,mastering the volatility characteristics and causes of inflation, can have prospectiveeffect for them adjustment of production yields and product prices, avoid big impacton their production and profits from inflation. At the same time,we analyse thecharacteristics of monetary policy from the perspective inflation, has a practicalreference value. Based on the above considerations, this article from the followingaspects to expanded, and gives the corresponding conclusions.(1)Using least squares estimation, the median unbiased estimation and gridpoints method to estimate the sticky level of CPI and the eight categories of totalinflation CPI inflation.Then Using turning point test methods, which proposed byBai-Perron,to estimate the number of turning points and the transition time of eachvariable. Each variable has different sticky characteristics and turning points.Basedon that,we buide a DSGE model. We portray the inflation sources from the angles ofprice stickinessand wage stickiness. Adjust the sticky to analysis their impact on theimplementation of the effect of monetary policy. The existence of sticky often makesmonetary policy has real effects, while the presence of sticky hindered its regulationon nominal variables. Improving the openness level can make regulatory effect ofmonetary policy narrowed.(2) We summarize the measuring methods for inflation expectations currently,and using the time varying parameter state space model to estimate the inflationexpectation. Then using ESTAR model to portray the asymmetric characteristic of inflation expectation. Gives an overview of the heterogeneity of expectations, higherorder expectations and coordinated expectations in international research field; Thenwe analyse the relationship between monetary policy rules and inflation expectationsmanagement in short-term and long-term prospective. By Granger causality test todetermine whether China’s monetary policy has been to better anchor inflationexpectations. From the perspective of volatility, using BEKK-GARCH model toanalyses the spillover relationship between inflation expectations and money supplyand exchange rate.(3) Using the HP filter method, the weighted median method and SVARapproach to estimate the core inflation in our Country. By contrast, selecting themost able to represent the results of our long-term trend of inflation to further study.The median weighted method are most representative through trade-offs in allaspects. Then we build the markov regime switching vector autoregression model (ieMS-VAR model), from the perspective of core inflation investigated whether China’seconomic presence the regime switching effects, as well as the characteristics ofdifferent Inflation Regime. Comparing the persistence and the correlationcharacteristics between different variables in different regimes, as well as the impactof monetary policy and exchange rate policy to economic variables in differentregimes. The probability of continued in low inflation regime is0.8881, theprobability of sustained in high inflation regime is0.9304. When the economy is in alow inflation regime, the growth rate of the money supply and the exchange ratehave more obvious impact on inflation. Contrasting the results of the impulseresponse in different regimes have small differences.(4)Using SVAR model to identify the causes of inflation in our Country.Weconsiderd three angles, those are demand-pull inflation, cost-push inflation andimported inflation. Through portrayed by the impulse response function and variancedecomposition results, we know the affect of various causes and the impact of theproportion for the current inflation volatility.From impulse response function resultwe can know, The aggregate demand shocks has the largest impact on inflation,followed by the import factor, the smallest is the aggregate supply shocks.From thevariance decomposition result we can know, The impact off gdp accounted for5.652%, exchange rate shock accounted for0.919%, accounting for0.744%of themoney supply shock, accounting for4.232%of food price shock. accounting for 5.339%of the international commodity prices shock. Then we can know that thedemand shock accounts for6.396%,the supply shock accounts for4.232%and theinternational shock accounts for6.258%.(5)Through building the TVP-VAR model, we decompose the inflation rate intotwo factors, they are the common factor and the stochastic factor. Then we Portraythe characteristics of different factors. Given the impact results of heterogeneityshocks from money supply and the exchange rate to the difference inflation factors.The mean of the common factor has relatively more hige and low volatility, so thecommon factor is more stable.At different time points,we give the heterogeneitymoney supply shocks and exchange rate shocks,both inflation components havedifferent response characteristics.