Empirical Research On Price Fluctuations Of Shandong Province

As an important macroscopic economic indicator, the price has the inseparable relation with the macroscopic economic movement. It is "the barometer" of economic development, whose extent of fluctuations reflects the rarity of resources in economic movement. As a matter of fact, the price is an issue of resource allocation, analysis of which is actually analyzing the entire economic system. The Consumer Price Index (CPI), is a reflection of the relative movement of the trends and extent of the price of consumer goods and services bought by urban and rural residents in a certain period of time. CPI is widely used as an important indicator of the extent of inflation ( or deflation) ,thus, it is of great importance to study the CPI.The monthly CPI would be affected by seasonal factors, thus, it is not conducive to judge the turining point of economic cycle timely and accurately. In developed nations, in order to make monthly data of different periods comparable thus to reflect the sudden changes in the economy and to provide basis for prewarning and macro-control and regulation, researchers usually employ seasonal adjustment to fixed-base monthly CPI to elimate its seasonal changes.As a major economic province of China, it is necessary to study the price fluctuations of Shandong province, to exam the extent of the price fluctuations and to which extent it is influenced by outside, to test whether there exist significant trading-day effects and Spring Festival effects, and to analyze the influence of government price-control , so as to contribute in economic growth analysis of Shandong Province.In order to achieve the above research goals, after reviewing the latest research, taking price theory and seasonal adjustment theory as a guide, this thesis employs quantitative methods to make study, using the CPI index from January 1994 to October 2007 of Shandong Province as a sample.Firstly, use X-12-ARIMA model to adjust CPI index of Shandong Province; test with regARIMA module and find that there is no significant trading-day effect; test the Spring Festival effects with TRAMO / SEATS model and find it significant. Then with the method of identifying the points of the volatile changes in time series put forward by Miller and Wichern, this thesis analyzes the volatility of the CPI index and find 13 abnormal points, then explains the reasons . Finally, based on the results of this empirical study, we come to the conclusions and make recommendations.In this empirical research, we find that the price in Shandong Province fluctuates in line with the macroeconomic background, shows a rising trend, which reflects some inflation pressure; there is no obvious trading-day effects, while the Spring Festival effect is notable; unexpected events have great impact on the price level; government's policies of price control can reduce the price level in short term, but it will increase the extent of long term price fluctuations. Based on the findings we come to the policy recommendations as followed:First, facing the current inflationary pressure, the government should pay close attention to the economic movements, take practical measures to stabilize the prices fluctuations. Second, with the development of Market Economy, the government should gradually relieve unnecessary price controls, move price policy from pricing to market regulation and control. Third, the unexpected events will aggravate fluctuations, the price level of Shandong Province is largely influenced by the exchange rate, import and export trade, and other uncertainties, we should strengthen our concern in this area, give full considerations to the impact of price fluctuations and adopt positive measures to cope with this. We also find that the X-12-ARIMA seasonal adjustment method can effectively eliminate the seasonal factors in time series thus obtain more accurate data, which reflects the sudden changes in the economy timely, provide basis for prewarning and macro-economic regulation and control.The main contributions in this thesis are: First, compared to the existing literature, this paper has a larger sample, thus we can get more precise results; second, most of the existing literature use the original sequence for analysis, while this paper employs the X-12-ARJMA model to do seasonal adjustment to data, which can eliminate the effects of seasonal factors on price level, thus this study is more reliable; third, in the paper we analyze CPI series of Shandong Province with X-12-ARIMA model to estimate the trading-day effects and the Spring Festival effects; Finally, after seasonal adjustment to CPI series, this paper does further research with the method put forward by Weicheer and Miller to analyze the characteristics of price fluctuations much better.