The Analysis Of Ma In Factors On The Price Volatility In China

As an important macroeconomic indicators, price is inextricably linked with macroeconomic operation.It is an "indicator" reflecting the market economy,it is also a "regulator" allocating the economic resources of the market. Price stability has been the one of the pursuit objectives of national macroeconomic policy. In recent years, China's various types of price index showed rising, as the level of prices not only involves the livelihood of the residents, the production of enterprises, but also the direction of the macro-control policies, thus prices again become the focus of attention by the concerns and concerned about inflation to deflation.Against this background,the research on factors causing price fluctuations appears to be particularly important. In the context of rising prices, the upward pressure on the price level by demand factors has very important significance for the orientation of the monetary policy established by the Central Bank. If demand factor is the pressure of rising prices, we need to give priority to raising interest rates, such as tightening monetary policy, but if there are the supply-side shocks in addition to the factors of the demand, we need both monetary policy and to parallelly promote the exchange rate,financial and other macro-and micro policies. Therefore, researching on the demand for the upward pressure on prices has great significance for the formulation of China's monetary policy.The first chapter of the article is the introduction. This paper introduced the background and significance of the research, and research status at home and abroad. From 1997, China entered the period of low prices,it is the period of deflation, although China began to identify the anti-deflation as macroeconomic policy objectives, and adopt positive macroeconomic policies to raise prices, but China's price level has not yet been out of the shadows of deflation. In recent years, China's comprehensive price is rising, which makes the price once again becomes the focus of attention by the concerned and concerned about inflation to deflation.The second chapter introduces the theory of price fluctuations and receives major factors that impact price fluctuations,such as AD-AS model, monetary theory, Markup theory and purchasing power parity theory and so on. Modern theories of inflation believes that aggregate demand change is one of the main factors affect inflation . Investment, government spending or net exports changes can make the changes in demand, and promote the growth of output, beyond the potential productivity. Traditional monetary theory believes that the price changes are caused by the amounts change of currency, as there is excessive amounts of currency in circulation, the price increases; on the contrary, the pricce declined. Therefore, the rising prices in the long term depends on the rise in currency more than the increasement in revenue, it is only a monetary phenomenon, so factors other than money are not important, the supply impact factors may bring temporary price increasement, as long as not expanding the money supply and prices will not rise. Markup pricing theory advanced by Gordon (1985) and Mehra (2000) believes that the wage increasement in excess of productivity gains, and excessive demands have an impact on pricing of the enterprise, and cause the consumer prices and overall prices to rise through the process of circulation. Markup pricing means, in order to determine the price of a product, adding a percentage (or absolute) to the estimated average (or marginal) costs, which means that the number should be included in some costs that belong to any specific products, and to maintain a vendor rate of return on investment. Stigliz (1997): Price changes in the monetary phenomenon is more than that as the labour market phenomenon. the external theory of Kierzkowski (1976) proposes: the exchange rate and price changes determine the domestic price level by the foreign trade goods, and the trade goods prices determine the industrial wage level, and through the assimilation effect of inter-industry wages impact on non-trade goods Industry wages and pricing.Chapter three synthesizes the above theories, summarizes the main factors for price changes, and then simply analyses the processing changes of these factors and the correlation with prices based on the information in Chian. first, changes in demand factors: it refers the extent that the economic overall total demand exceeds the capacity limit, if there is the negative pressure of demand, in this situation, because of fear of lower sales, enterprises do not pass on the full burden of rising prices of raw materials to consumer prices. Second, the nominal wage factors: In a bid to maintain a certain rate of return, it is necessary to response the rise in the nominal wage exceeding labor productivity to the rise in sales prices, particularly personal services costs in the consumer price account for higher proportion,it is very sensitive to reflect changes in the nominal wage. Third , mobility factors: many studies for the stability of money demand function raise questions and conducting research, but not by excessive money supply increasement is the main factor for price increasement. Four, the exchange rate factors: Generally speaking, the prices of transactions are directly affected by overseas prices and the exchange rate, and in consumer prices, the industrial price including the majority of the trade goods are similar with the foreign price changes denoting by domestic currencies. Five , agricultural products and oil price factors: prices of agricultural products ,oil and some other varieties are affected by climatic conditions, international oil prices and so on, with little macroeconomic fundamentals conditions, but the price changes will become a kind of impact factors.Chapter four introduces the model and measurement method of analysing the time-series,it is the most important theories part of this paper. Section one introduces the characteristics of the time-series smooth test, test methods and basic theory of cointegration. Section two presents the Granger causality test, whose role is to determine whether there is a causal relationship between two variables. In the circumstances of time sequence, a causal relationship between two economies variables can be defined as: If under the conditions of including the previous information of variable X and Y, the forecasting result is better than that only from the previous information of Y , that is, the variable X helps to explain the changes of Y in the future, and variables X Granger affects Y, that there is a causal relationship between the two. Finally we introduce the VAR model and the impulse response function. The time series analysis method introduced by this chapter will be fully applied in the next chapter.Chapter five is the most important evidence part of this paper.It mainly uses the time-series theory in chapter four to analyse the impact factors of price fluctuations. Section one identifies whether the variables sequences are the unit root process with the unit root test, judging whether they exist cointegration relationship. Then the on the base of this conclusion, in the second two, through Granger causality test to judge whether there is a causal relationship between prices and the six factors achieved from the third chapter .The third section conducts the autoregression (VAR) testing for the system consisting of price index, the output gap, money supply, nominal wages, exchange rates, international oil prices and agricultural products prices. With the purpose to further test the relationship among the price Index, output gap, money supply, nominal wages, exchange rates,and prices of international oil and agricultural products.Chapter six puts forward some policy recommendations in view of the current economic situation of prices in China.