The Study On Core CPI Of China

Currently,most of the developed countries and regions has published core CPI regularly as an indicator to monitor inflation.Although the core CPI has been published regularly by our national statistical agency for sometime,the research about the core CPI is relatively inadequate in domestic.So,it's theoretically and practically important to study the core CPI of China to monitor the change of inflation and analyze the macroeconomic situation to provide reasonable references for national welfare policy and scientific monetary policy.At present,there are statistical and econometrical methods to compute the core CPI.However the national statistical agency of China has not yet published regularly the weight data about the commodities in the goods basket of CPI.Thus the scholars in domestic are prefer to studying the core CPI of China with the econometrical method.And what's more,the structural vector auto-regression model(SVAR)of the econometrical method has relatively good properties in the estimation of the core CPI.So this paper will estimate the core CPI of China with the above model.Firstly,based on the producer profit function of the hedonic market equilibrium model of Rosen(1974),the paper has analyzed the constituent elements of price index from the perspective of producer.The result shows,that the price index can be decomposed into cost index and profit margin(In the form of income cost ratio)when the factor of demand is ignored in the price index;and the price index can be decomposed into cost index,profit margin and demand index when the demand factor was considered in the price index.Therefore,the above research conclusion can provide a theoretical basis for the variables choosing in the SVAR model to study the core CPI,which can cover the shortage of the previous studies that could not analyze the impactions of cost factor and technical factor respectively in the CPI,because they have used the growth rate of economy(or growth rate of industrial added value)as the conduction variable of supply factor to estimate the core CPI.Secondly,based on the relationships analysis of the utility change,the technological progress and the profit margin,the paper has analyzed the constituent elements of the price index from the perspective of the consumer,through converting the impaction of the profit margin in the price index to the impaction of the consumer utility change that is caused by the quality change of the output.As the impaction of the consumer utility change with the quality change of the output in the price index is its bias,thus the impaction of the profit margin in the price index is its bias naturally.Therefore,the above research conclusion has provided a theoretical foundation to study the bias of the CPI and other price indexes from the perspective of the producer investment yield(profit margin),which will cover the shortage of the bias study of CPI from the perspective of consumer as they can't study the bias of other price index,such as the method of Hamilton and Costa(2001)that only can be used to study the bias of CPI.Finally,based on the above study conclusion about the constituent elements of the price index without the demand factor,taking the monthly data of CPI and other related variables from January 2001 to August 2015 as sample,the paper has constructed a SVAR model with the three variables of yield cost ratio(cost profit margin was introduced into the model as yield cost ratio),cost index and price index(CPI,etc.)to study the core CPI and decompose the impactions of the cost index and the profit margin in the CPI respectively.Then based on the bias analysis of the price index and the empirical decomposition of the impactions of the cost index and the profit margin in the CPI,the paper takes the monthly data of CPI and other related variables from January 2001 to May 2016 as sample to estimate the real CPI whose bias component has been deleted.The result shows,that the volatility of the estimated core CPI is relatively small,which can forecast the future trend of the CPI in a certain extent,at the same time if the bias of the CPI was not deleted,the average upward bias of the estimated core CPI is about 0.927 percentage points.