A Research Of Generalized Price Index In China:Theoretical Model And Empirical Analysis

At present,the macro control in finance mainly responds to changes in the inflation level.Accurate measurement of inflation is an important prerequisite for optimizing the regulation effectiveness of monetary policies and promoting a stable and long-term economic growth.Currently in China,the price level manifests itself as a "structural" characteristic of the long-term coexistence of the drastic fluctuations in asset prices and the relative stability of the prices of general consumer goods,which means the current measurement indicators of inflation has been difficult to accurately characterize the general price level.Based on the above research background,this paper proposes to formulate the generalized price index that incorporates asset prices to achieve the price index correction.In view of the lack of theoretical basis for the existing research and the strong subjectivity in the selection of indicators,this paper first systematically sorts out the relevant economic theories in asset prices affecting inflation and incorporating asset prices into inflation measurement from the perspective of economic theory,and then,from the perspective of mathematical model,further elaborates and expands the economic theory,to analyze a multi-sector New Keynesian general equilibrium benchmarking model with the price indicators proposed by Mankiw & Reis(2003).Finally,based on the principle of maximizing the central bank utility(overall social welfare),this paper deeply analyzes the optimality weight determination mechanism of each component price index.This paper has established a relatively solid theoretical basis for the formulation of the generalized price index.Subsequently,for the sake of preciseness,this paper screens the asset price indicators included in the generalized price index by empirical method.First,based on the revision of traditional inflation indicators,combined with the relevant economic theories,this paper discusses in depth the attributes and characteristics of asset price indicators that are included in the generalized price index.Then,using the literature research method,based on the systematic review of the representative literature in the relevant research fields,the initial screening of the indicators is carried out,and three types of asset price indices including the real estate price,the stock price and the exchange rate are obtained.Finally,based on Granger causality test,TVP-VAR-SV model and other measurement methods,secondary screening for the asset price indicators is carried out,and finally determines that real estate prices and stock prices are the asset price indicators that should be included in the generalized price index.Finally,based on the above general equilibrium analysis,the tested real estate price and stock price are included to build a four-sector economic model including the real economy and virtual economy.The GMM measurement method and Interior-Point optimization algorithm are used synthetically to develop the generalized price index in China.The validity test shows that the generalized price index is superior to the consumer price index under multiple testing standards.Adopting the generalized price index as an indicator of inflation when the monetary policy for stabilizing price is operated can significantly reduce the cost of macro-control,effectively improve the utility of the central bank,and promote economic output to approach the potential level.Based on theoretical analysis and empirical test,this paper argues that there is a bias between the CPI indicator and the general price level in the context of "structural inflation".In view of making momentary policies more forward-looking and the maintenance of financial stability,China should choose the representative asset price indicators to construct the generalized price index,and focus on the stability of the price level in the broader sense.