Research On The Measurement Of The Core CPI And The Effectiveness Of Monetary Policy

CPI is a price index,reflects degree of changes in consumer goods prices and service project trend purchased by urban and rural residents in a certain period.It is the main reference index of observing inflation level,also an important basis of monetary policy for countries (or regions).But some items in CPI subject to temporary factors, what can not be controlled or key concerned by monetary policy.In order to make the price index with more economic meaning and reference value,it is necessary to unravel the "veil" of temporary factors,have a real understanding of the long-term growth trend of economies goal and fixed reference for the monetary policy objectives.The core CPI eliminate some goods which influenced by temporary factors,can reflect the underlying inflationary pressures more clearly.Monetary policy focus on core CPI can helps avoid monetary policy mistakes.Based on analyzing the current CPI system and the necessity of measuring the core CPI,this paper discusses the measurement of the core CPI and the effectiveness of monetary policy from the qualitative and quantitative two aspects.On qualitative analysis,the paper expounds the limitations of current CPI system,the necessity of measure the core CPI and the relationship of the core CPI and monetary policy effectiveness.This paper in empirical analysis bases on elaborating the limitations of our CPI system and the relationship of core CPI and monetary policy effectiveness, uses the data from January 2002 to December 2010,It measures the core CPI of our country by eliminate method and truncated mean method and respectively by means of unit root test,granger causality test,cointegration test for its stability and guide relations and long-run equilibrium relationship of inspection respectively,through empirical analysis get the following conclusion:monetary policy authority should focus on the core CPI,formulate and publish the core CPI help enhance the effectiveness of monetary policy,measure the core CPI should become monetary policy routine operations.But the core CPI can not completely replace the CPI,both supplement each other.