A Quantitative Study Of The Influences On Domestic Inflation Caused By Imported Factors

Due to the global economic turmoil caused by the financial crisis in2008, theUnited States launched a series of quantitative easing monetary policies to restore itseconomic growth. Under the condition of open economy, the inflationary pressurebrought by the series of measures can’t be ignored. Therefore, the research about theinfluence of the imported factors on the inflation in China is of practical significance.This paper reviews and summarizes the imported inflation and related referenceson SVAR model. Secondly, the paper explains the basic concepts and features ofinflation and imported inflation. After that, the writer draws a conclusion on the newfeatures of inflation in Chinese in recent years. At last, a detailed analysis of themechanism of imported inflation formation is conducted, revealing the structuralfactors and pathways concerned. The focus of the empirical study falls on the marketprices brought by the impact of imported factors in the hope of setting up a structuredauto regression model (SVAR model) with the consumer price index and importedfactors from America acting as the variables. Moreover, the impulse responsefunctions and variance decomposition method are adopted. The results show that allkinds of imported factors do have substantive impact on our commodity prices,among which the international commodity prices contribute most to the fluctuation ofCPI in China. According to the time cue, the impact on the CPI itself is their mostintense reaction in terms of the short term reaction. After five months, their mostintense reaction change into the impact of international commodity prices emergingwhich contributes more than the CPI itself. With respect to the medium and long term,the differences between the variables shrink and are tending towards stability.According to the results, extra attention should be given to the fluctuation ofimported factors represented by international commodity prices. Based on theempirical results, several suggestions are put forward to help to restrain inflation.