China's Consumer Price Index, The Warning System Is Built And Forecast Analysis

Price stability is one of the goals of the macro economic policies, and controllinginflation is the top prior task for every country in the world. As a measure of inflation, CPIis a key monitoring indicator, which reflects the economic trend and social stability. Sincethe spread of the global financial crisis, effective controlling of the inflation become theprior task in China’s government.In this paper, we studied and analyzed the root cause of the CPI fluctuation, operationmechanism and the transmission channel. And then, according to the domestic and foreignresearch conclusions on the influencing factors of CPI, combined with the classicmacroeconomics about the genetic theory on inflation (crunch), we summarized18important macroscopical factors, which influence the trend of CPI. According to thecharacteristics of the economic cycle, using the classic jet lag method, I find out the mostimportant indicators that influence CPI in china, including three leading indicators and fourconsistent indicators.According to the composit index theory, I worked out relevant diffusion index andcomposite index, and demonstrated the CPI has gone through recent peak, and at the nextstage prices may drop down. On this basis, we construct the leading comprehensiveindicator of CPI. Using this model, we predict the CPI of the2012will fall down. Withimpulse response function, the leading comprehensive indicator is measured to lead fivemonths for CPI and the consistent comprehensive indicator is synchronicition in CPI. Topredict2012CPI, the reasul shows that prices will be lower and the inflation pressure isweak.For the further studies the internal relationship between CPI and the leading andconsistent indecators, this paper set up VAR model to predict the fluctuation of CPI. Andthrough the impulse function and variance decomposition model to examine how theeconomic variable of the price influences the mechanism transmission path and influencedegree. Because CPI sequence has a significant contribution to itself so establish SARIMAmodel to forecast CPI with a short-term. Both of the two models show the same conclusionthat the price level will be declined and relatively stable in2012and will not causeinflation.In the same time, this paper attempt to introduce early warning signal system, withinflation measure standard--prices level rising as early warning signal, and determine theearly warning boundaries. According to the predict conclusion, this pape comprehensivelyrelease2012the warning lights for "blue", which means in2012there be a low risk of inflation in China. Thus the government can take appropriate measures to stimulate themoderate growth of CPI, to promote economy healthy and rapid development.