A Study On Transmission Mechanism Of Imported Inflation

With the deepening of world economic integration, the connection between each country becomes more and more complex. Inflation in China is more easily affected by imported factors. After the financial crisis, in order to save the market, all the countries continue to inject liquidity to the market, which leads to the liquidity surplus in the world. As an economic giant with high dependence on foreign market, this inflation in China is the same as the inflation from2007to2008with the obvious imported feature. So, conducting some study on the transmission mechanism of imported inflation is helpful to clarify the cause and mechanism of current inflation, and provide some measures to cure inflation.Firstly, this paper introduces the theory of imported inflation, one is the structuralist theory of inflation represented by the Nordic model, and the other is the monetary theory focus on the money supply. Base on this, the article proposes that there are four pathways of imported inflation, there are the transmission mechanism of commodity prices, commodity supply and demand transmission mechanism, trade balance and the international capital flows pathway.Secondly, it introduces the actual performance of these four pathways in this inflation by the trend of the data which is different from the former five inflations. Then, the paper makes an empirical analysis based on the data from January of2001to December of2011. Through the Granger causality test, Johansen cointegration method, impulse response function and variance decomposition analysis of VAR models, the paper concludes the pathway of commodity prices and trade balance are more effective in China.In the end, the article proposes some measures to ease the imported inflation in China, such as promoting the upgrading of industrial structure, developing the new energy, enhancing the ability to make the commodity price, increasing the diversity of foreign exchange reserves, reforming the system of foreign exchange and expanding the channels of monetary intervene policy.