An Empirical Test Of The Transmission Mechanism Of International Commodity Price To Domestic Commodity Price

International commodity prices reflect the price fluctuations of the world’s major commodity prices and overall trend of macroeconomic development. With China’s rapid economic development and the accelerate pace of opening up, especially after joining the WTO, our country’s import demand of international bulk resources commodities are increasing which results in high dependence on external resources. Therefore, the rising international commodity prices delivered to the domestic market through import channels, causing fluctuations of industrial producer price index (IPI) and consumer price index (CPI). Especially since the second half of2010, the domestic CPI continued to rise to record a new high for the year, a new round of inflationary pressures reinforced and the soaring price of international commodity have a strong convergence. Bulk primary products are very important substance of the national strategy and national livelihoods, therefore, emphasis on the international commodity market volatility phenomenon and understanding of international commodity prices on the transmission mechanism and the effects of domestic commodity prices can provide a degree of reference and help of price regulation and effective management of inflation.Domestic and foreign scholars have done a lot of research in the conduction of international commodity prices on domestic commodity prices, and the results have provided a lot of reference and help on the effective governance of the domestic price regulation and inflation. Foreign scholars’points include two aspects:First, whether commodity prices will affect inflation or not, and the second is whether commodity prices can expect inflation. Domestic scholars’points include two aspects:First, study the influence of international commodity prices on domestic CPI from the macro level, most scholars believe that international commodity prices affect the domestic CPI, very few scholars believe that international commodity prices have no impact on the domestic CPI; Second, many scholars focus on the impact of a single bulk primary products price fluctuations on the domestic price. After the introduction to the basic theory and method, based on January2002to September2011a total of117sets of time-series data, the article analyze the conduction effect among international Commodity Research Bureau (CRB Index), IPI and CPI through descriptive analysis, cointegration, vector error correction model methods, do a comparison with the United States at the same time.According to the qualitative and quantitative analysis we can conclude that the trend of CRB, IPI and CPI in China has been overall consistency. Especially after2003, the convergence of three is more significantly, they are linked up by an industry chain (upstream production areas to downstream areas of consumption), the magnitude of change is CRB>IPI>CPI. Moreover, IPI act as an intermediate medium in the international commodity prices conduction process of China’s domestic commodity prices. The conduction process can be described as the CRB to IPI to CPI. Empirical evidence shows that the fluctuation of CRB can explain4.16%to71.33%of IPI fluctuations and7.27%to24.06%of CNCPI fluctuations. International commodity price index have a positive impact on the domestic price index, and the initial effect of this influence is little, then increasing, and reaches a maximum at the fourth stage. Comparisons between China and the United States show that, the impact of international commodity prices on China is slow, while the impact of the United States is very deep and quickly.We put forward some policy recommendations based on the conclusions and reasons analysis:China should actively participate in the international market price formation process, reform China’s commodity circulation system, strengthen supervision and monitoring, set up a scientific and rational international market commodity reserve system, speed up the adjustment of economic growth, strengthen the linkage between domestic futures market and spot market, establish and improve the monitoring and early warning system of international market commodity’s price.