The Effects Of Hot Money On China Inflation With Path Analysis

Begin from2002, the international balance of payment in "errors and omissions of turned negative into a positive number, we had began to discuss topics about hot money inflows into China. In2008, the number of hot money a scholar had measured was actually more than foreign exchange reserves amount, although it was very funny, but it also gave China’s management a wake-up call,"a lot of hot money flowed into the China". In2009, for months increasing amount of china’s foreign exchange reserves was more than trade surplus and foreign direct investment.In2005, China’s foreign exchange management system reform happened, since then, The yuan’s exchange rate against the dollar had falled continuously.In2006the Chinese stock market crazy rose, in2007A shares the Shanghai composite index rose to more than6000, and later crazy fell.Since2007, China’s real estate market also started the crazy rise, no matter what the government policy cracked down, house prices were still crazy. Also, international commodity market prices were also very crazy increase, but China what to buy goods, what the prices of goods rose, China selled anything, what the price of goods fell.In the Chinese stock market, real estate market and international market plunged as extra bulk, at the same time, consumer price index also residents began round and round of ups and downs. Price stability is one of China’s four great target for economic prosperity, It is of vital importance for economic prosperity and social stability. Therefore, the reasons of the given inflation occurs and causal path analysis is a very important realistic meaning for stable prices.After reading a number of literature, the author research hot money to the effect of inflation from the path analysis Angle. This paper need to answer the following questions:How much money can be pumped into China, into China of hot money was to which go to, the stock market? The real estate market? Or commodities market? while the consumer price index was also affected hot money? If it was true that hot money affects the prices, which way, the stock market? Property market? Or commodities market?Around these problems, first of all. from the economic theory, this paper analyzes that hot money affect inflation is in what effect and hot money affect inflation is what transmission path.Second, by comparing the related analysis and conditions related analysis, under the given condition of the real estate market prices, stock market prices and commodity market price, inspection the correlation coefficient of hot money and inflation and the unconditional correlation coefficient whether there were differences. If there are differences, we believe that the market is path that hot money affect inflation, otherwise, it is not a path that hot money affect inflation. Again, because path analysis is the main analysis tool measuring the strength of the causal relationship between variables, first of all, this paper analyzes hot money affect the strength of inflation by property market, the stock markets and commodities markets using the path analysis; while path analysis just confirmed the authenticity of the imaginative causes, it does not reflect the lag influence between variables. Therefore, this article verify further hot money affect inflation in what path, the way through the unit root test, cointegration analysis, vector error correction model, granger causality test, impulse response and variance decomposition. Finally, this paper presented the results comparing descriptive statistics to the model analysising.This paper has two innovation:(1)、The existing literature about hot money to the effect of inflation was only limited to the theoretical discussion, while this paper is mainly through empirical analysis to prove.(2)、This paper perspective and method is different from the other articles which only used VARM or ARDLM, this paper is to start in descriptive analysis, and by establishing a path analysis and impulse response、variance analysis model, cross validation, complement each other, and finally gives hot money transmission to the path of the cpi.