| Price plays a key role in the economy. It contributes a great deal to the operation of market economy, making it one of the most popular topics of scholars, especially during the inflation.Since the reform and opening up, China has went through several inflations. The frequent fluctuation of price has an adverse effect on the society and people's life. It not only distorts the operation of the price mechanism and result in an inefficient allocation of resources, but also disturbs the economy as a whole. Therefore, in order to keep the price stable, we need to explore the cause of inflation and deflation, and take measures accordingly.In the past, most of the existing papers on China's inflation focus on the domestic factors, for instance, the domestic investment, the unbalanced economic structure, the economic reform and so on. However, with continuing opening up to the outside world, the domestic economy of China has closely related with the global market, so it's natural to take the international factor into consideration, especially when we think about the recent inflation which goes along with the international price rise. Thus, more and more scholars begin to do research on the relationship between international price and domestic price.There are many paths of price transmission. The international price fluctuation can pass to the domestic price through goods and money market in different ways. Considering the great development of China's international trade, this paper will mainly focus on the price path, and try to tell whether the price fluctuation has been transmitted through this path.With Cointegration among CRB, PPI and CPI series, the analysis shows that the international price does exert influence on China's price level, with greater degree on PPI than CPI, but the effect will show a little time later not immediately. Meanwhile, the empirical evidence also suggests that the price transmission becomes more and more important as China's continuing opening up to the outside and deeper relationship with the international market. However, the mainly cause of China's price fluctuation is still the domestic factors. In all, we should not only pay attention to the domestic factors, but also to the international price changes in order to keep the price stable. |
