Analyse On The Main Inducement For China's Inflation Based On Var Model

Inflation's origins are the macroeconomic factors which induce inflation. Correlated study of Inflation's origin is a significant problem in the area of macroeconomic research. There are many related researches in our China, but this problem has not been well solved. In recently years, the macro-control force of Chinese central bank is much stronger than before, but there are still have some problems. As a result, it is endowed with important theoretical and practical meaning to study Inflation's origins in China.Inflation has a certain affect on national efficiency of resource allocation and the fairness of income distribution. A domestic scholar considered that China must keep fully alert for chronic and durative of inflation, and that inhibiting inflation is the first aim of Chinese macroeconomic policy. Therefore this article's objective is to find out macroeconomic factors which have induced effect to inflation in China, to analyze how to govern and prevent inflation by controlling these factors, and to make policies inhibiting inflation.The research methods of this article, based on summarizing former researches, include making using of Keynesian economics and Monetarism to deduce which macroeconomic factors have induced effect to inflation in China, applying empirical research methods based on VAR model to test whether they are Inflation's origins by Chinese data 1985-2006, and building regression model to gain their induced coefficient to inflation. This article chooses indicator as induced indicator of China's inflation, which can accurately measure and represent the origins of China's Inflation, and gains main research results as below:First, it can be known from the results of Granger Cause test that, Their eight indicators are the original indicators in China's Inflation: FER, FDI,EM, raw material and energy price(RE),CHIBOR, money in circulation M₀, money supply M₂,Second, it can be known from the results of co-integration analysis that, in the long run, induced effects of original indicators of China's Inflation size down as below: M₂,RE,M₀,EM and FER.Third, according to analysis of empirical results, the inflation targeting system should be implemented by China. At mean time central bank should pay highly attention to the intermediate target of cash flow Mo, and improve money policy's transmission mechanism. Government should intensify farm products purchasing and energy industry's supervision.All above, this article induces the origins of China's inflation by qualitative analysis and quantitative study, picks up corresponding induced indicators, tests whether these indicators has induced effect on inflation, analyzes their induced coefficient on inflation and raises reasonable policy suggestion.