Research About Causes Of Inflation In Our Country

Since the1930s, inflation has become one of the economic core problems to which the whole world generally pay close attention. Inflation has significant effects on achieving economic targets, improving resource allocation efficiency and distributing income fairly. Galloping inflation may even lead to the turbulence of the society, the nation and the whole world.Since the Reforming and Opening, we have experienced a total of seven rounds of inflation, which obviously shows its cyclicity and periodicity. Due to the blocking effect which the serious inflation can bring on the development of society and economy, it is necessary to take reasonable and appropriate measures to deal with the inflation for the further promotion of society and economy. Thus the primary premise for solving the problem is to find out the causes of inflation.Many factors can account for the occurrence of inflation, including monetary factors, demand factors, cost factors, structural factors, input factors, expectation factors and so on. To all countries at different times and in different economic situations, the reasons for inflation diverge from each other.Through the combination of qualitative, quantitative analysis and empirical research, this thesis divides the causes of the inflation in China into two aspects—the research of the universal law and that of periodicity. On the basis of the availability of annual data from1986to2011, the author first analyzes the influence of the growth of money supply and financial institutions’loan on the inflation by Granger causality test, impulse response function and variance decomposition; thus drawing the universal law of the inflation.With the reform of exchange rate system as time division basis, the author then divides the periodical research into1996-2005and2005-2011two phases, and according to the quarterly data by adopting factor analysis, Granger causality test, impulse response function and variance decomposition, analyzes the impact of monetary factors, demand factors, cost factors, structural factors, input factors and expectation factors on the inflation. After knowing the influential factors, the author transforms the integrated variable of factors into related common factors, thus to find out the specific Index variables affecting inflation.In the end the author draws a conclusion that the excessive growth of money supply will lead to the inflation, while the growth of financial institutions’loan has relatively weak effect on the inflation. After studying the inflation in a certain period, it is known that, in addition to the money supply growth, when monetary factors are stable, cost factors, structural factors and input factors may also lead to the occurrence of inflation. The inflation from2003to2005stems from the rising of material price and production cost. And it belongs to cost-factor-driven and structural-factor-driven inflation. The inflations in2007-2008and2010-2011, on one hand result from the cost factors; on the other closely related to input factors, such as the national commodity prices, the dollar index, foreigners’direct investment and so on.