Inflation Risk Measurement In China Under The Background Of Post-Financial Crisis

As an important research project, inflation has been paid wide attention. On the one hand, the rise of price has great influence on a nation's economic health, people's welfare and the harmony of society; on the other hand, inflation is a comprehensive and complex phenomenon which involves many aspects of economics. The worldwide finance crisis beginning from 2007 had affected the economy of China seriously. In November 2008, Chinese government adopted a series of policies which contained ten main measures and 4000 billion RMB to stimulate the economy, followed by reducing the interest rate and deposit reserve ratio several times. The proper fiscal and financial policies had successfully brought recovery to economy, but the price also went up. In August 2009, CPI stopped dropping and started to climb up, and in November 2010, it came to a new high of 28 months from August 2008, up 5.1% over the same period last year. Now inflation returns.Therefore, studying inflation matters both theoretically and practically. It is also necessary to measure the risk of inflation as it brings many uncertainties to our life and economy. According to the above, this paper studies the risk measurement of inflation, using P-star model and MDEV model based on the deviation of money supply from its trend, which contains four chapters and conclusion as follows:The first chapter gives a brief description about the theory of inflation and the situation in China since reforming and opening. It can lay the foundations for risk measurement by summarizing the basic theories, classifying the origins and reviewing the history.The second chapter presents the research status on risk measurement of inflation and a literature review. The own method in this paper is decided after summarizing and reviewing the past research.The third chapter discusses the background, characteristics and possible factors of the inflation in these latter years. Analyzing how it emerged and developed can pave the way for empirical study. The fourth chapter uses P-star model and MDEV model which is designed in this paper and based on the deviation of money supply from its trend, giving a reasonable explanation of inflation.The main conclusions are as follows:first, although P-star model can indicate and predict the change of price in some extent, it has flaws in the explanation of inflation pressure in the short time, suggesting that output gap and the deviation of monetary velocity cannot be the main cause of the inflation nowadays; second, MDEV model based on the deviation of money supply is able to explain the inflation well, indicating that the inflation pressure appears when money growth exceeds its long trend, and the large increase in money supply is the most important cause of inflation today.According to the research in this paper, the corresponding suggestions in policy are proposed as follows:The expansionary fiscal and financial policies do play an important role in reviving the economy, but after recovery, in order to manage the inflation risk and prevent the price from rising too rapidly, prudent fiscal policies and appropriate money growth become necessary again. However, in the long run, only through adjusting economic structure, transiting increase mode, and with proper fiscal and finance policies, can we reduce the inflation risk to the lowest extent, and ensure a sound and rapid economic growth.