Gap Between Producer Price Index And Consumer Price Index

The departure of CPI and PPI since 2012 and the rapid reversal of the gap in 2017 are phenomena that have never happened since the marketization in China.The co-direction of CPI and PPI are obviously diminished.In this paper,we first adjust the CPI index from product classification to industry classification caliber,and then analyzes the causes of the gap deeply,giving a detailed introduction to the upgrading of household consumption.This article uses the data of 12 sub-industries from 2002 to 2016 to do its empirical analysis,then we test the robustness using the alternative variable test,"placebo" test and so on.The results of empirical test in this paper show that the transformation of the resident consumption structure to modern science and technology,entertainment,etc.will aggravate the growth divergence between CPI and PPI.Result of empirical tests also show that the deeper the state-owned economy,The gap between the two types of price indices may be smaller and the share of state-owned enterprises will also aggravate the increase in the gap between the CPI and PPI.The higher the complexity of inputs,the greater the cost of distribution will exacerbate the gap,but the influence of omplexity of inputs is not obvious,and monetary factors have a limited impact on the gap.In terms of policy recommendations,this paper argues that in the case of a structural departure from CPI and PPI,monetary policy can not simply focus on CPI but rather enhances the influence of PPI in monetary policy,in order to prevent PPI from structural deviation"Decoupling" to maintain the overall stability of the price level.