Analysis Of Foreign Exchange Reserves, Stock Price Index Based On Non-parametric Method

Consumer Price Index (referred to as the CPI) is closely linked with people’s lives. CPI can be used to measure the purchasing power of the currency, to reflect the level of wages, to some extent, reflect the degree of inflation. Price stability is one of the goals of the national macro-economic policies, to highlight its importance. Since the subprime crisis, the consumer price index has been showing an unstable state. Studying the impact of foreign exchange reserves, stock price index, the exchange rate on consumer price index has important theoretical significance and application value.Parametric regression model provides powerful tool for analyzing time series data when the models are correctly specified. The form of the regression function is known. If you can determine the distribution, this model works well. After the financial crisis, data structure of China’s economic variable changes.It exhibits nonlinear features such as no normality, asymmetric cycles, bimodality, heteroscedasticity and nonlinearity between lagged variables, and it is difficult to clear the relationship between the data. So using the traditional model will be wrong. In this case, the non-parametric method is a good choice. Compared with the classical regression model, nonparametric regression model has the advantage of high goodness-of-fit and makes more accurate inferences. Therefore no longer follow the traditional method, but first explain the relationship between the foreign exchange, stock market index, the RMB exchange rate and CPI. Followed analysis the impact of factors on the CPI by the establishment of vector auto-regression model, the results showed that due to two opposite effect of international capital flows and commodity trade, the impact of the RMB exchange rate on the CPI is not entirely. The impact of the stock market on the CPI is not significant. Foreign exchange has a significant effect on the consumer price index.More in-depth study of the impact of Foreign exchange on the consumer price index use of non-parametric method again. Found that the impact of foreign exchange on consumer price index at different times is not the same. There is not entirely positive relationship. Finally, make the relevant policy recommendations.The innovation of the paper:First, compare parameter regression model, nonparametric regression model and semi-parametric regression model, then summarize their strengths and weaknesses and the scope of application. Second, study the influencing factors of the consumer price index using of non-parametric kernel regression method.