An Empirical Study On The Causes Of China’s Inflation In Post-crisis Era

As a complex and frequent economic phenomenon, inflation has influenced thesteady development of national economy and society. As a result, inflation is not onlya key government macro-control object, but also an important research topic ineconomics. After the global financial crisis in2008, many countries coped with thefinancial crisis by implementing expansionary economic policies, which promoted theeconomic recovery and brought the tremendous pressure of inflation at the same time.Since2009the consumer price index has climbed from negative to positive, the trendof China inflation has experienced the radical change to the relatively stable change,which has reflected clearly by the CPI monthly year-on-year data. In2012the CPI fellback, but it is still near3%of the warning line, inflation back alarm bells have beenrung. In Post-crisis Era, inflation has more transmission channels,wide range andstrong global linkages, the causes of which has the strategic significance to explore inChina.At present scholars’ research on the causes of inflation in China mostly focusedon a single point, and few articles take expectations factors of inflation into empiricalanalysis. Based on the causes theory of inflation and the formation mechanism ofChina’s inflation in Post-crisis Era, this paper systematically analyze the factors ofcost, demand for money, etc, and include expectations factors into the empiricalanalysis, which will have more economic theoretical support, but also conform to theeconomic reality. Aiming at the causes of China’s inflation after the financial crisis in2008, this article adopts the static Multiple Linear Regression Model to analyze oninflation explanation ability of each index primitively over the same period, based onwhich builds the dynamic Vector Autoregressive Model to investigate the dynamiceffect of all factors in this inflation, finally uses variance decomposition to comparethe influence degree of various factors further, by using monthly data from2008January to2012December. The results show that cost and money factors provide themajor source to the inflation in Post-crisis Era, which is characterized as structuraland input, residential expectations have slightly lag but significant influence on theinflation, while wages and demand causes does not play a major role. Based on the study of this inflation, and combined with China’s nationalconditions, we get the following policy implications: improve material reserve systemand fiscal subsidy policies to reduce the cost-push factors on inflation; strengthen theagricultural investment and real estate regulation to curb the driven factors ofstructural price rises; perfect the monetary system and reduce excess liquidity; guidethe public expectations in a timely manner to improve the forward-looking andcredibility of policies.