The Analysis Of Transmission From China's Import And Export Trade To Domestic Inflation

As the development of the economic globalization, the international factors including import and export trade are significantly influencing china's inflation. The inflation between 2006 and the first half year of 2008 is the effective evidence. Though influenced by the subprime crisis, china's inflation pressure was relieved in some degree; the depreciation of USA dollar caused by the abundant liquidity input from FED to resist the financial crisis would severely increase the prices of primary products. As for china, the pressure of imported inflation caused by international trade might appear again. Therefore, in the grim background of the world, it is necessary to study how to defend the imported inflation. Especially for the third largest trading country-china, with over 60% foreign trade dependence, it is particularly important to research the paths, effect and defending strategies of inflation transmission from the import and export tradeFirstly, qualitative analysis is made. All of the four generally accepted reasons of inflation exist in the china's international trade practice, which could be concluded into three paths: the international transmission mode of aggregate demand-supply, the transmission mode of imported primary products and the transmission mode of currency supply from trade balance. Moreover, the detailed analysis of internal mechanism of each path is put forward.The quantitative analysis is also provided. The three transmission paths are quantified into index (CLI, CRB, and FR) to explain the CPI. The paper adopts the empirical methods of multiple linear regressions and establishes the vector auto regression (VAR) to observe impulse response function and variance decomposition to analyze the degree of influence of different transmission paths.Finally, according to the above analysis, the relevant policy suggestions are put forward in the end for defending the imported inflation based on international trade.Balance of international payments and the price stability are the two parts of macroeconomic objectives; the import and export trade and inflation are the particularly important study in the economic development, so the analysis of internal relation and the policy suggestions are of significant academic meaning and practical meaning.