Construction Of China’s Virtual Economy IndexBased On VAR Model

Under the background of China’s rapid development of virtual economy, it is necessary to manage the overall running situation effectively. But now, domestic and foreign research mainly focus on the construction of FCI which reflects the situation of a country’s financial markets, the study on the construction of VEI is relatively deficient. Out of this consideration, this article try to construct virtual economy index referred to relevant researches in order to measure the overall development of the virtual economy. This article designs a new describing index-virtual economy index which includes price and non price variables such as interest rate, exchange rate, stock prices, bond prices, house prices, futures trading volume, money supply, and use the generalized impulse response function method based on the VAR model to make an empirical research on the construction of China’s VEI. Besides, we use the cross time relevance, granger causality test, linear graphs, circulation prediction model and other methods to evaluate China’s virtual economy index from two aspects of inflation and economic growth.The empirical results show that: firstly, stock prices and money supply have heavy weights in the index, which are33.4047%,20.7728%. It shows that additional money is the main cause of China’s inflation and the wealth effect in stock market which affects the consumer demand is gradually increasing. The explanations to VEI itself and its change trend also show that the changes of the index conform to the situation of virtual economy. Secondly, Virtual economy Index can predict future inflation rate before5and6mouth and it can predict inflation very good. But the forecast ability to the economic growth is limited. The forecast ability of the index to the future economy mainly reflects on inflation but not economic growth.