China Consumer Price Index Fluctuations Of The Empirical Research

Consumer price index (CPI) is a kind of price that urban and rural residents pay for consumer goods and services and the final price of social products and services. The index is closely related with people's lives and the essential statistical indicator which reflects a country's or region's quality of the macroeconomic situation. In the national economy as a whole price system, the index is in an extremely important position. It also has been used around the world to judge inflation. CPI is an essential barometer of the economy to reflect of the market economy status and an important indicator of the operation of the national economy. From the macro-management aspect, CPI is to manage at all levels of governments to master the consumer price situation, research and development of the consumer price policy, wage policy, monetary policy, as well as provide a scientific basis for national accounts. On investment, it is an important decision-making base to increase or decrease business investment. From the employment point of view, it is the government and enterprises to adjust wages and allowances of an important reference. Thus, The consumer price index fluctuations affect not only our standard of living of the residents, but would also lead to China's market economy development in all areas of change.In 1994, according to national statistics price reform, our country abolished the official cost of living price index and retail commodity price index, and began to establish the consumer price index and retail price index separately. Therefore, the data of this paper start from 1994.This article does a more in-depth study on China's consumer price index fluctuations in the characteristics, causes and trends in the future development. First, this paper uses statistical methods to analyse the characteristics of CPI fluctuations. The seasonal fluctuation is analysed by moving average method; the cyclical fluctuation is analysed by spectral analysis; the volatility clustering is analysed by difference method. This part of the paper concludes that CPI has the characteristics of season, cycle and clustering. Second, this paper analyses the causes of CPI fluctuations. The method of this part is to extract major factors from the composition of the eight sorts of the consumer price index. This paper analyses the main reasons of the impact of the consumer price index from the structure inside and tries to use VAR model in econometrics. By the lagged analysis of all endogenetic variables, the part concludes that Food index and Residence index are the main causes of CPI fluctuations. Finally, the paper analyses the trend of CPI. This paper uses AR model to forecast the trend in the next half year of 2008. The conlusion is that the consumer price index will drop slightly in the next half year, but still more than 4%. So this paper makes a number of policy proposals to stabilize prices.