A Study On The Impact Of International Commodity Price Fluctuation On China 's Price Level

Commodity products are important trade products on the international market, and also Chinese major imports. In recent years, with the rapid urbanization process of Chinese development and industrialization, Chinese demands of crude oil, iron ore, soybeans and other commodities is rising. Although China has already become one of the members of the largest international commodity demands, the domestic price of basic raw materials and commodity prices has to passively accept international price fluctuations due to the pricing of commodity prices is in the international market. Since the financial crisis, international commodity price volatility has become the important external shocks factors of domestic price stability. In the long run, China still needs a lot of commodities to continue to promote the industrialization and urbanization, commodity price fluctuations affect the domestic price stability will persist, therefore, study the impact of international commodity price volatility on Chinese price level has important practical meaning and policy implications.Based on previous research, firstly we qualitative analyze the influence mechanisms and principles of international commodity price fluctuations on the domestic price level through trade channels, monetary policy approaches and institutional ways, and then use co-integration and state-space model to study the impact of international commodity price volatility on the domestic price level with the study sample from 1996 to 2013 monthly data, and the results of comparative static and dynamic analysis, taking into account the impact of change on the empirical results, aimed at put forward some policy suggestions of practical significance for the country’s price stability during economic run and control inflation phenomenon.The results indicated that fluctuations in international commodity prices has a positive impact on the Chinese price level, variable coefficient reflects the asymmetry characteristics change. Specifically, the rise in commodity prices impact domestic prices greater, price fell less impact the domestic prices. Meanwhile, the impact of price fluctuations in international commodity effect on Chinese price level is not from the numerical point of view, either short-term or long-term price levels are subject to greater its influence, which shows our price fluctuations have a significant inertia.Finally, on the basis of theoretical analysis and empirical research,we continue on a systematic, detailed policy analysis and propose specific policy recommendation -s.