The Analysis Of Influencing Factors To Domestic Inflation Based On VAR Model

This paper consists of three parts, the first part describes the measure of inflation and howto define inflation. Compared with other measures of inflation indication, The CPI ischoosed to measure inflation, for the reason that CPI is the best indication.The review of relevant literature study and the theoretical analysis consist the second part.In this part, combined with the actual situation in our country and the conclusion whichother scholar had draw, we discuss the impact of macroeconomic variables such as interestrates、exchange rates、real estate、stock market and output gap on inflation of China. Thispaper also analyzes the factors under the conduction mechanism of inflation and how thesefactors affect the level of inflation. On the basis of analyzing the transmission mechanismof the factors, we further explores the various forms of variables.Finally, empirical study、conclusions and countermeasures were the third part. Empiricalstudy based on macroeconomic quarterly data between2001-2013years. The paper firstprocess quarter data by using X11, and make related data standardization and indexation.Finally, through the pulse response of VAR model, variance decomposition and Grangercausality test to describe the dynamics of inflation. The results show that the persistence ofinflation, interest rates and house prices are the main cause of inflation. Countermeasuresof this article highlighted launching taxation system reform, the implementation of inflationtargeting policy etc.