Research On CPI Fluctuation Law And Its Influencing Factors In China

The consumer price index (CPI) can directly reflect the change of the price level as an important indicator of macro-economic. The CPI is seen as a barometer of economic development, so its fluctuation is closely related to national economic development and residents’ daily life. In recent years, the CPI has become one of the hot issues because it increases very high and it isn’t steady. Above all, it is necessary to research the influencing factors of CPI fluctuation, so that it can take some measures to prevent the volatility of our country’s economy.The paper used the HP filter and X-12 seasonal adjustment method to draw the seasonal factors in China CPI monthly price index data from 1990 to 2014, then got the CPI volatility and divided into eight cycles of CPI fluctuation by using the HP filter, which provides the scientific basis for the forecast and analysis of CPI fluctuation in the future. Those are based on home and abroad research about the CPI fluctuation theory and its influencing factors, and are according to the study on the characteristics of establishment and publication in our country and the analysis of development history of CPI.The paper analyzed what is the CPI’s fluctuation rule, why CPI fluctuated, and found that CPI fluctuation is relation with CPI structural factors. Therefore, the paper used VAR model, the Granger Causality Test, Impulse Response Function and Variance Decomposition to find out the relationship CPI fluctuation and external influencing factors from the perspective of structural factors. From the result of Granger Causality Test, the CPI and the Agriculture’s index of wholesale prices, the CPI and the Retail Price Index of building materials and hardware and electrical supplies have Granger Causality relationship. From the result of Impulse Response Function, the two external influencing factors and CPI have a positive impact on the CPI, but the Retail Price Index of building materials and hardware and electrical supplies is the biggest positive impact on the CPI. From the result of Variance Decomposition, the CPI for their contribution rate is the largest and the Retail Price Index of building materials and hardware and electrical supplies for the CPI’s contribution rate is higher than the Agriculture’s index of wholesale prices.