Research On The Dynamic Relationship Between Agricultural Prices And Inflation In China

As an agricultural country, the agricultural products are China’s importanteconomic foundation. The fluctuation in price of agricultural products is not onlydirectly related to the income of the agricultural producers and the development ofagricultural production, but also affect the price of the other products, and may evencause inflation. Study on the mutual influence between agricultural price volatilityand inflation is of great significance.This paper takes related data of31provinces in2002-2012as sample, using thepanel data regression to study the relationship between agricultural price volatilityand inflation. The paper set up four groups of model using the retail price index ofgrain, the retail price index of food, the inflation expectations based on the consumerexpectations index and the inflation expectations based on consumer confidence index.First of all, due to the inaccuracy and uncertainty of the time series regression resultwith different agricultural prices proxy index, this article used the mixed regressionmethod to proce data. Considering the characteristics of panel data, the paperproposed fixed effects model and the random effects model, and aimed to nostationary sequence, the paper proposed bi-directional variable intercept fixed effectmodel. Secondly, in order to systematic study the interaction relationship betweenagricultural product price fluctuations, inflation and inflation expectations, this paperestablished the panel data vector autoregressive model, the result shows there issignificant correlation between them. Thirdly, using the panel granger causality to testthe relationship, the result shows that the agricultural product price fluctuations,inflation and inflation expectations are Inter-Granger causality. Finally, the papergives the relevant policy recommendations according to the results.Based on the provincial panel data, this paper did in-depth studies on therelationship between the agricultural prices and inflation by bi-directional variableintercept fixed effect model, panel vector autoregressive model and panel grangercausality test method. The purpose of this paper is to reveal the intrinsic interaction,and be useful for the relevant government departments to improve macro-control andmake decisions.