The Causes Of Inflation And Dynamic Analysis In China

Incentives of inflation are a variety of macroeconomic factors which Inducedinflation occurs. The related research is an important issue in the area ofmacroeconomic research. There are so many research on this issue, but rarelycomprehensive analysis of various factors impact on inflation. Inflation have a certainimpact on a country’s resource allocation efficiency and the fairness of the incomedistribution. Domestic scholars believe that China must alert to inflation’s Long-termand persistence. The primary goal of macroeconomic policy is to curb inflation.Although China’s macro-control efforts in recent years gradually increased, but thereare still many problems, in-depth study on China’s inflation incentives has importanttheoretical and practical significance.The purpose of this study is to identify the factors that evoked inflation amongthe whole macroeconomic factors and analyze how to control and prevent inflation bythe regulation of these factors, so as to formulate and implement the anti-inflationarypolicy. Based on previous studies and classical macroeconomic theory, this researchanalysis various macroeconomic factors which triggered inflation, select some indexwhich could represent the Inflation incentives as a predisposing factor ofinflation.Then, on the combination of the qualitative grouping in the economic sense,a common factor is extracted to better adapt to the application of econometric models.Finally, this study use the methods of empirical research to test the size and delayaffect of these indicators on inflation in China, establish vector auto-regression modelto get the vector-induced coefficient of various factors on China’s inflation.The empirical study uses the2001-2011macroeconomic quarterly data fortesting and analysis, mainly to get the following results: first, the Granger causalitytest results shows that factors of demand class, the monetary factors and structuralfactors are inflation causes in China over the past decade. Second, under theframework of vector auto-regression analysis, use the impulse response function andvariance decomposition to examine the relationships between various factors and theprice index, the model shows that the consumer price index showed a strongcorrelation in the short term impact on itself which we call it Inflation expectations.And the following macro variables: gross domestic product, foreign direct investment,fiscal revenue and expending, the velocity of money, money supply(M2), the secondary and tertiary industries in GDP difference,the state-owned enterprises andurban enterprises employees’ income difference have significant impacts on the CPI.import and export did not significantly impact the CPI and moderately loose monetarypolicy will not significantly push inflation. Third, through the analysis of theempirical results, presented China inflation governance and the role of preventionpolicy recommendations, including to improve the CPI system and theimplementation of the quasi-inflation targeting regime, strengthen the supervision ofinternational hot money inflows, due to lower the pace of economic development, usethe moderately loose monetary policy and prudent fiscal policy adjust the industrialstructure and so on.In recent years, domestic academic research on China’s inflation incentives andinduce indicators, mostly are the qualitative and quantitative analysis of singleincentive’s effects of inflation, select three to five inflation-induced index andconduct empirical analysis about inflation-induced relationship. By a combination ofqualitative and quantitative research, this article deduce the demand side, supply side,input, monetary and structural factors which induced inflation, select the appropriateinflation-induced indicators, test the presence or absence of induced relations betweenvarious indicators and inflation. Through this work，t his article comes out with thesize and influence delay of the induced coefficient, propose rational policyrecommendations based on the empirical results. This article has relativelycomprehensive characteristics.