| Inflation is always a hot topic in the academic field, not anything else can be always discussed like inflation. In the past few decades, the super inflation has happened three times, but the influence is limited mainly in certain countries and areas. In the 1970s, the inflation is a serious problem in western countries; Latin America is the most disaster area in the world in the 1980s among the places where the inflation happened, the average annual inflation rate rises to more than 80%. In Argentina, Brazil, Chile, Peru, Bolivia and Nicaragua even happened the hyperinflation of which the inflation rate reached up to three or four digits; in the 1990s, the inflation in the transition countries and developing countries is serious. Along with the economic globalization, the inflation affects not only a single country, infected channels become more and more. It always transmits through trade. The inflation in most countries is imported inflation besides the misleading of the money policy. The rising of the imported product's price is the main reason of the rising of the domestic price level. Wen Jiabao, Premier of the People's Republic of China, in the press conference of the Fourth session of the 11th National People's Congress in the Mar. 14th, 2011, said"Inflation is like a tiger which can't be shut in the cage again if let it out, curbing inflation will be the first macroscopic policy work in 2011". So inflation has the most influence on the healthy running in the macro-economy. In theory, the uncertainty of the changes in price caused by the complication and the polytrope of inflation attracts many scholars, there are so many research achievements in the causes and characteristic. Associating with these achievements, the policy makers can make better monetary policy and financial policy to largely boost the management efficiency of inflation, keeping the economy healthy and steady. Along with the developing of the economics, there are many new metering methods to test inflation, which can be the reference of the policy makers.Chapter one introduces the definition of inflation, measure gauge, calculation method and the different type of inflation. After that, introduce the literature review from the structural testing, the regime switching of inflation, the cause of inflation, external shocks, the relationship between the return on assets and the inflation rate. Last, introduce the characteristic and innovation of this dissertation. Chapter two introduces the inflation theory factions. After that, introduce the analysis of the relationship under the condition of China's economic environment between the inflation and the economic growth. There are theory of"inflation boost the economic growth"from the view of Keynes, and theory of"inflation harms the economic growth"from the view of development economics to discuss the relationship between inflation and the economic growth. At last, analyze the international case for the relationship between inflation and the economic growth.Chapter three, with the data of inflation rate between the 1983 and 2010, makes the structural testing of China's inflation path and uses the Markov-switching model to make the regime switching. This chapter uses the Chow statistic, CUSUM testing, CUSUM square testing to test the structural changes in the inflation path. The result is that, under the significance level of 5%, the concomitant probability of each time point is that, July 1988 is 0.106113, accepted by the null hypothesis, that means there is no structural change, August 1988, is 0.0169, refused by the null hypothesis, that means there happened the structural change, January 1994, it's 0.063756, it's accepted by the null hypothesis, there's a structural change at this point; February 1994, it's 0.025227, it's refused by the null hypothesis, there is the structural change at this point. These two structural change points, of the former is demanding inflation caused by"Baogan"system in 1988 and the latter is inflation in 1994 caused by both the price reform and the exchange rate reform. This aligns with the results come from CUSUM testing and CUSUM square testing. And then, use the Markov-switching model with first-order lag to calculate the smoothed probability of China's inflation and deflation regime of the inflation rate. It turns out that in the high inflation regime, it obviously has the trend to get longer which can be the reference of monetary policy making. Analyzing the inflation process's influence on the current macro monetary policy, it turns out that unsteady monetary policy is the main reason for the inflation rate regime switching. It's the monetary policy and financial policy that cause or influence the switching among the inflation regime, so effectively applying the policy instrument and carrying out easy or tight monetary policy can effectively achieve the influence the inflation path, so as to boost the steady running of China's economy. From this we can compare the economic policy in every stage with this fitting test so as tosum up the effective monetary policy for managing every inflation regime.Currently, China is in the high inflation regime, it not only happens in China, but all the areas whose economy keeps on growing after the economic crisis. According to the newest published data, prices in Brazil raise 6%, Russian 10%, similarly, most areas in Asian except China, Indonesia 7%, India 9.5%, Singapore 5.5% and Hong Kong 3.6%. China's central bank's alert to hedge against inflation in 2010 is incredibly predicable. Our government should apply the proper tight monetary policy to restrain inflation, associating with the discriminatory loan scale to boost our economy to steadily and healthily develop.In Chapter Four, we analyze and test the real cause and the nominal cause of China's inflation, the nominal cause is the augment in the money supply, using the cointegration test the money supplement rate and inflation rate with the data from Jan.1983 to Dec.2010, we find that there is no cointegration relationship between the growth rate of money supply and the inflation rate. But the consumer demand growth rate has obvious Granger influence on the inflation rate, this means that China's price level change is driven by both the nominal demand and real demand. So, while retraining inflation it's much more effective to control the nominal factor and while managing deflation it's better to apply the real factor. After recovering from the financial crisis, China's economy and inflation both have a new trend for growth. Many scholars believe the current inflation is cost-push inflation. Having experienced the easy monetary policy during the financial crisis and the upward pressure on the RMB, the fluctuation of the nominal economic variable such as price level, interest rate level and exchange rate raise largely, increasing the role of monetary policy. This active nominal economy makes China successfully get out of the shadow of the financial crisis, but the sustaining easy monetary policy makes the recovery nominal economy much more active, this can be seen from that the M1 and M2 of 2010 which has grown by 40%. With the people's inflation expectation after the recovery of economy and the obviously relative raise in price level in life make the nominal cause of inflation gradually increasing.Chapter five tests the influence that China's foreign reserve on inflation from the external factor.Leverage an analytic framework to analysis foreign reserve how to affect inflation based on Lucas supply function and some microeconomic assumptions. Based on the chosen sample, we find that foreign reserve has a significant impact for inflation in China. If the current foreign exchange reserves are increased by 1 percentage point, inflation will increase the impact of 0.1 basis points. Therefore, the foreign exchange reserves contribute half of the increase of inflation. Time-varying parameters of the test find that with the reforming on foreign exchange management and improving management level foreign exchange reserves'impact factor on inflation in China will rise first and then decrease. Under the current condition that inflation is getting more serious, we should restrain inflation in the following aspects. First, actively expand the domestic market, although the increasing domestic demand will raise the price level and boost inflation, but based on this chapter's research we find that the most influence factor is the increasing foreign reserve rather than the demand-pull inflation. The expanded domestic demand is good to the capacity adjustment and change part of the export trade into domestic supply. Second, strictly control the price of major commodities that affect the rising of the price level, especially the price of commodities that related to the people's livelihood, such as the grain, oil and electricity, etc. Third, actively develop the foreign trade that settled in RMB, reduce increased foreign reserve caused by the foreign trade. Fourth, actively regulate the exchange rate adjustment mechanism. There should be certain flexibility for China's exchange rate, namely increasing certain uncertainty and investment risk, avoiding the excessive hot money along with the reducing exchange rate.China's government should manage the current exchange rate and foreign reserve regime, further reform the current exchange rate system. The exchange rate reform since July 21th, 2005, the fluctuation of exchange rate determined by the relationship of market supply and demand, associating with the controlled floating exchange rate system makes our economy develop healthily and steadily. Besides that, we can follow some examples that apply the objective exchange rate mechanism to set up an exchange rate target zone around "center exchange rate", which is conducive to constraint the fluctuation scope of exchange rate, help maintain exchange rate at a stable level and effectively strike the hot money which is targeting exchange rate.This paper presents a new perspective on the Fisher hypothesis, which states a positive relationship between nominal stock returns and inflation. The new approach is based on a wave let multiscaling method that decomposes a given time series on a scale-by-scale basis. Empirical results show that there is a positive relationship between stock returns and inflation at the middle scale (1-month period) and at the longest scale (64-month period). This indicates that the nominal return results support the Fisher hypothesis for risky assets in d3 and s6 of the wavelet domain, while the stock returns do not play a role as an inflation hedge at the intermediate scales. The key empirical results show that time-scale decomposition provides a valuable means of testing the Fisher hypothesis. From the test, the fluctuation of price level can eventually affect the running of the real economy, so we should take measures to restrain inflation when inflation level is high to avoid the uncertainty of the economy.At last, we analyze the influence that the monetary policy on inflation from the policy factor and make the empirical analysis. We find that the augment of the loan and the rising of the interest rate that caused by positive monetary policy can not increase the pressure of inflation. Therefore, we can use more prudent monetary policy to curb inflation, and ensure the growth of the economy. ?...
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