Research On Inlfation Of China In Open Economy

Since1978China has reached a great achievement in construction ofeconomy,however,with the high speed of development in economy, there are a greatmany problems in China,one of which is inflation.From1978and now on,there hasbeen six times of inflation in China,and each of them has great negative influence ineconomy development and people lives.Thus,doing research in inflationproblem,and then deciding politics to solve the problem,are significantly important.After using other scholars’study for reference,the text studies the leading factorsinducing the current inflation and their impact by using stationarytext,CO-integrating regression,error correction model,impulse response function.ThePaper is divided into five chapters as follows:Chapter1will be introduction of the whole paper and gives the purpose ofwriting the paper,current situation of international research about theseproblems,methods of research and probable innovation in the paper.Chapter2willoutline classic macroeconomics theory including Keynesian theory of inflation.Newtheory of the Cambridge Schoo1,Monetary theory of inflation School and SwedishSchool of inflation theory.Chapter3will deduce four macroeconomic factors whichhave induced effect to inflation of China based on inflation theory,and analyze thetransmission mechanism that how these factors affect inflation in China.Chapter4will choose indicators as induced indicators of China’S inflation.applying empiricalresearch methods to test whether they are Inflation’s origins and building regressionmodel to gain their induced coefficient to inflation.Chapter5will put forward acouple of suggestions in three parts to solve this problem.According to the study,wecan find that there is a strict relation which is reflected in exchange equation amonginvestment in fixed assets,broad money supply,banking rate and foreign exchange.Itis indicated that the increase of investment in fixed assets and broad money supplywould pick up the inflation while the increase of banking rate and exchange rate canreduce the inflation.