The Research On China's Price Variance Against The Background Of RMB Appreciation

Since 2005, the society has been concerned about the price level and the RMB exchange rate because price level is an important indicator of macroeconomic, which is inextricably linked to the macroeconomic, and the governments have been regarding price stability as one of the objectives of macroeconomic policy, especially for China. In recent years, as China's economic gradually starts to integrate in world economy, domestic prices are more exposed to external shocks, so this thesis should not only consider the impact of domestic factors, but also take into account external factors when we study the issue of China's recent price variances.In this context, the paper focuses on the macroeconomic variables how to affect prices which happens since the RMB exchange rate reform.First, the paper summarize the theory of price variances and the literature of price variances at home and abroad and recognize the price variances is the result of various factors working together. This paper will study price variances from currency, demand and external input.Second, this paper study the status and influencing factors of price variances in China. The thesis describes the domestic consumer price index, producer price index and other indices of price variances and characteristics of price variances. We study the effect of the money supply, exchange rates, oil shocks, domestic output and the stock market five macroeconomic variables to price variances, and further analyze the transmission mechanism of price variances.Again, on the basis of these, this thesis select the factors affecting price variances from currency, demand and the external input and construct of the indicator system. We use stationarity test, multivariate cointegration, Granger causality test, impulse response functions and variance decomposition to measure the main factors and their impact of price variances, and draws the following empirical conclusion:the money supply, nominal effective exchange rate, and monthly imports oil prices and GDP have had an important impact of price variances, but the impact of Shanghai Stock Index is relatively small. The analysis shows:the money supply, RMB appreciation, imported oil prices and the rising stock market played a role in driving commodity prices, while domestic output is able to suppress inflation. Through the variance decomposition are:the lagged 15 cases, there is little difference on the contribution of price changes in China among monetary factors, demand factors and the external input factors.Finally, considering empirical conclusions with China's current economic situation, the paper make the following policy proposals:implement flexible monetary policy; expand domestic demand; establish long-term use of resources strategies.