Cpi And Ppi Nonlinear Relationship Study

In recent years, the CPI increase range has obvious difference with PPI's. And this phenomenon seems to be against with the traditional economic theories. According to industry economics theory that the economic the upstream industry products'price changes transfer to downstream industry, and pass to the consumer goods at last. PPI is initial price of industrial products enter circulation field. In theory, PPI changes could pass circulation field transfer to CPI. It has two ways: PPI—production material—CPI; PPI—life material—CPI. Analysis of the relation between CPI and PPI clearly could help to formulate macroeconomic policy.This paper firstly analysis the CPI and PPI content, calculation methods and practical economic data and show that exists the nonlinear relationship between CPI and PPI. Then select our country CPI and PPI monthly data from January 1993 to September 2010, then minus 100. Through establish of nonlinear dynamic system (C-PNLDS) models, to further in-depth research and verify the nonlinear relationship between CPI and PPI. And the conclusions as the follows:The first one, through each significant variables'coefficient of CPI equation in C-PNLDS model, we can know: CPI play a negative role for its own growth; PPI play a positive role for CPI'growth. And this conclusion is consistent with traditional price transmission theory; The coupling effect of CPI and PPI play a positive role for CPI'growth.The second one, through each significant variables'coefficient of PPI equation in C-PNLDS model, we can know: PPI play a negative role for its own growth; PPI's square play a positive role for PPI's growth, it show that PPI is the accelerator for itself; CPI's square play a positive role for PPI's growth, it show that CPI is the accelerator for itself; The coupling effect of CPI and PPI play a negative role for CPI' growth.The third one, from the roles of the coupling term of CPI and PPI for the both, it play a positive role for CPI'growth, and play a negative role for PPI's growth, so the relationship between CPI and PPI is predator-prey.The fourth one, through researching each variable coefficient we can know that the accelerating role of PPI exceed the negative role of itself when PPI'growth range is greater than 2.69; The accelerating role of CPI for PPI can obviously shown when CPI'growth range is greater than PPI 1.81 times.The fifth one, from the stability analysis of C-PNLDS model can know, in C- PNLDS four equilibrium points, only = [0, 0] is stable point, so C-PNLDS is stable in certain extent.The sixth one, C-PNLDS has obvious response for a unit change impact of CPI and PPI's initial value. But the change of initial value caused the changes of C-PNLDS tend to disappear. So C-PNLDS has stability.Then select the same data establish VAR model. From the contrast between C-PNLDS model and VAR model can know, at the aspects of F values and AIC value C-PNLDS model is obviously better than VAR model. The most important is VAR model reveals linear relationship between CPI and PPI, can explain lag term how to influence CPI and PPI, and C-PNLDS model reveals the nonlinear relationship between CPI and PPI. So C-PNLDS model is better than VAR model.