The Analysis On GDP Deflator Based On The Vector Auto Regression Model

As an important phenomenon in the field of macroeconomics, Inflation is closely linked with macroeconomic operation. Accurately measuring the real level of inflation has great significance for the stable development of the economy. Currently, many countries generally use Consumer Price Index (CPI) as a standard measure of inflation. However, final consumption expenditure of residents in the proportion of GDP is smaller, can't fully reflect the price changes. Gross domestic product (GDP) deflator is the ratio of nominal GDP and real GDP. It has more extensive calculation base than the CPI, covering all goods and services including production, capital, import and export except consumption. Therefore, GDP deflator can reflect the general price level more correctly, it is the most appropriate composite price index to measure of inflation.GDP deflator and the CPI are not equal because of the scope and weight of accounting differences. In this dissertation, compared both data from 1978 to 2009 empirically, and explained the inconsistency. Then use the least square method to establish regression equation from GDP deflator, CPI and Producer Price Index (PPI). Predicted there are still greater inflationary pressures in 2011 by the model.This paper used the GDP deflator as a standard of the level of inflation, founded that factors play a major role in Chinese inflation are economic growth, money supply, investment and foreign exchange reserves by Granger causality test. Then, create vector auto regression model, impulse response function to explain the process of above four variables on the role of inflation. Variance decomposition results show that the contribution of changes in inflation rates from high to low are economic growth, money supply, investment and foreign exchange reserves.Finally, Established impulse response function based on GDP deflator and the CPI from economic growth, money supply, investment and foreign exchange reserves. It is found that, in the short term, if economic grow too fast or the money supply increase, the rate of GDP deflator increase greater than CPI. It is opposite that if the investment or foreign exchange reserves increase. In the long term, economic growth impact on both considerable, changes in money supply or investment lead to the variation range of CPI larger than GDP deflator. Changes in foreign exchange reserves lead to the adverse result.