Measuring China’s Inflation Expectations Basing On The Questionnaire And The Study On Its Dynamic Process

Financial crisis exacerbated the fluctuations of the world economy. For China, the government carried out a series of measures in order to cope with the crisis. And the disadvantages of the measures gradually appear. One of the most obvious is high Inflation.The Inflation seriously affects people’s life and the normal operation of the capital market. So, managing Inflation becomes a problem that must be faced. As we all know, there exists a complex relationship between inflation expectations and the real inflation. So how to manage inflation expectations also becomes a major issue.Inflation expectation is a variable which is no measured. But we can get it from observable quantity. The researchers use a variety of model or method to estimate the inflation expectation sequence. All these methods can be divided into three categories:Getting it from the financial market; through econometric model to estimate the inflation expectations analysis and through statistical forms of inflation expectations in the investigation. Each method has its advantages and disadvantages.And this article selects the "C-P Probability Method", which based on the questionnaire of depositors, to measure inflation expectations. The results showed that:when the depositors’expectations are expected to obey normal distribution, the expectations sequences are very close to the actual inflation sequences, and the change trend of actual inflation and depositors’expectations are synchronized. Overall, the inflation Expectations’curve is flatter than the actual inflation’s curve.As the inflation expectations sequences been estimated, we then discuss the dynamic process of it. we analysis it from the following two aspects:the dynamic forming mechanism, the dynamic influencing process.(1) through studying its forming mechanism, we learned the method to estimate the inflation expectations are adaptive expectations. it was determined by the actual inflation of the past and present. Therefore, the central bank should pay enough attention on the inflation in case the formation of inflation expectations.(2) It’s very important to research the relationship between the real inflation and the inflation expectations. This article researches it from three aspects:The Correlation Test, Granger Causality Test, Impulse Response Function test of the relation between them. The results show that:these two sequences are stationary time series. The granger causality test show us more specific relationship:the current or previous actual inflation has a great influence on inflation expectations. Therefore, the monetary authorities must take control of the actual inflation and the best way to control the expectations is to maintain low and stable inflation. What’s more, the inflation expectation has a great influence on the current actual inflation too. Inflation expectations have self-fulfilling nature, so in order to control inflation expectations. The inflation expectations should be avoided. For example, the government should try its best to control the Inflation expectations at the very beginning or it will lead to the nature of self-realization.(3) There are many factors that can affect inflation expectations, such as exchange rate, interest rate, wage and price controls, the money supply, real estate, stock prices, commodity prices, etc.. In a word, the influence of all these factors should be considered when making monetary policy.