Historical Evolution And Forecast Of China’s Consumer Price Index

The Consumer Price Index (CPI) is an indicator which is used to describe the changes ofconsumer goods and services price level of the urban and rural residents. The CPI reflect thechanges of the price level which is relative to the price level in the base period. The prices ofconsumer goods affect the living conditions of the residents. The CPI is extremely important tothe national economy. With China’s rapid economic development and the international situationchanges, China is facing inflationary pressures more serious. In this context, this thesis used thesuperimposed Markov chain forecasting methods to predict China’s consumer price index. It canprovide a reference for the government to formulate macroeconomic policy. It can also provide areference for the enterprise to risk averse.this thesis reviewed the historical evolution of the consumer price index in China. Thisthesis introduced the compilation method and the classification method of CPI in Chinamainland and Hong Kong, Macao and Taiwan regions. And this thesis introduced the processfrom information collection to index compilation and the price index formula. And then thisthesis introduced the causes and the effects of several serious price volatility in China, since thereform and opening up.Superimposed Markov chain methods proposed in this paper is a new channel in the CPIshort-term forecast. This thesis used China’s consumer price index historical data. According tothe relationship between China’s consumer price index and inflation, this thesis divided the CPIinto five states: less than0%,0%to2%,2%to4%,4%to6%, more than6%. And thenforecasted the state of the price index used the each order transition probability matrix.According to the ergodicity characteristics of the price index series, this thesis concluded thestationary distribution of the CPI and the return period for each state. It showed that China’s CPIincrease will be in the range of2%to4%in2013, and the current price is very stable.According to the results of this study and the economic situation at home and abroad, Chinashould maintain the current prudent monetary policy. this thesis given policy recommendations from the four aspects of monetary policy, interest rate policy, exchange rate policy and fiscalpolicy.