Research On Inducible Effect Of Investment Expansion On Inflation In Our Country

Looking through our country's economic development in last twenty years, we find that investment expansion has been the important drive factor of inflation. Unscientific economic development idea, investment leading economic development mode and investment impulsionin drived by government in China, have brought the close relationship between investment and economic development, and have pricked up the extent that investment affected economic fluctuation. The incorrect economic development mode which strongly depends on investment has maintained high speed of economic growth, while paid out huge cost. Inflation which happened with the same cycle of investment expansion has become the important release manner of economic unbalance, and has brought a lot of negative influence.This thesis takes inherent relation between the latest three times of investment expansion and he latest three times of inflation which happened in l980's,1990's and early of 21C in our country as research object. It analyzes the appearance and reasons of investment expansion, on the basis of which, it lucubrates the main conduction mechanism that investment causes inflation. The author thinks that investment expansion firstly forms strong demand effect, energy sources gap effect and money supply effect. These three effects then cause inflation through corresponding conduction mechanism. Through empirical analysis on three kinds of effects mentioned of investment expansion, using Co-integration Analysis, Regression Analysis, Granger Causality Test, it proves that three effects do exist. According to further empirical test on the causality and long-term correlativity between investment and inflation, it shows that prominent causality and correlativity exist. Investment has obvious effect on inflation and is the important reason of inflation.Finally, Methods are raised to eliminate inflation caused by investment in our country. The ways include building up scientific economic development idea, changing economic growth mode from investment leading mode to consumption leading mode and reforming investment system.