Research On The Impact Of International Commodity Prices To The Price Level In China

International commodity prices showed a rising trend from the21th century. From the year of1978. the price level of our country had more relationship with international commodity, which made the inflation even worse. Then there is a question that whether the rising of international commodity prices is the reason why the inflation in our country is so high. If the answer is yes, how international commodity prices influenced the inflation and which channel and mechanisms for that? Meanwhile which kind of the characters and results of this channel and mechanisms will be discussed? For those questions,the transmission mechanism of international commodity prices is the key problem which we want to research on and find out the reasonable answer to this target. The result of the research can give the government some suggestion.Firstly, this paper reviews the characteristics of the trend of international commodity prices and the domestic price level in recent years. It also discussed the background of the conduction of international commodity prices to domestic, and the related concepts of imported inflation are defined. In my opinion,the phenomenon, that a country’s price level is triggered by the rising prices of commodity,is cost-push inflation.Secondly,this paper reviews the general mechanism of imported inflation,and focused on the international transmission mechanism of commodity prices. In my opinion,the rise in commodity prices can be transmitted to one country through two paths. One is transmitted to the domestic price level through the path of direct consumer goods, and the other is transmitted through the path of the upstream products to downstream products. Based on this,this paper performs logical deduction on the transmission mechanism of commodity prices to China.Thirdly, we research on the problem of transmission mechanism by using the Johansen test, the Granger test and establishing the VAR model. Firstly, the price level of our county is partly influenced by international commodity prices; secondly, there are two way of the transmission mechanism. Compared with the first way of the channel, the influence in the second way is not very obvious:thirdly, the international commodity prices have more relationship with the prices of downstream in our country for a long time, so we should take some reasonable measures for this problem.Finally, the paper proposes some measures to ease the imported inflation in China, from the commodity supply and demand level, commodity pricing and early warning mechanism.