Statistical Analysis Of Factors Affecting The Chinese Resident Inflation Expectations

Inflation expectations with a self-fulfilling quality, are one of the important factors that determining the true level of actual inflation. Since the founding of the new China, our country has experienced several times of inflation, especially inflation in1988-1990which led to panic buying, bank runs. High inflation expectations thus formed. Inflation expectations were the culprit of that inflation period. After2008global financial crisis, our government adopted the Quantitative easing monetary policy to revive the economy, as a result, there is excess liquidity in the market. Inflation is expected to remain high again. In recent years, the development of innovative network applications is unimaginable, messages spread faster and faster, increasing the range of audiences, leading the herding more likely to occur than in the past. Inflation expectations in this era, having a faster pace to format, more people to affect, more influence to put on the macro economy. The government has gradually realized the importance of managing inflation expectations. A profound analysis of the determinants of our residents’inflation expectations can help government target the implementation of macro-control and manage resident expectations. Strengthening the nature of inflation expectations and measurement studies have important theoretical and practical significance.Western countries had realized that inflation expectation played an important role in maintaining the macro economy, so they paid more attention to explore the factors impacting the formation of inflation expectations. Scope of the study includes not only asset prices, interest rates, exchange rates and other economic factors, but also the impact of inflation targeting and monetary policy transparency. The study of inflation expectations in China started relatively late, most of the domestic researches mainly explored the nature of China’s inflation expectations, in recent years, more attention were paid on measurement of inflation expectations and study of influencing factors. But in terms of research on the factors, Studies concentrated only on the impact of economic factors. This article attempts to construct a system with monetary policy transparency and economic factors to widen our research scope of inflation expectations influencing factors. We will further divide these factors into endogenous and exogenous variables, providing a more detailed analysis of factors influencing the resident inflation expectations.Based on the above considerations, the paper’s theme is set to a statistical analysis of factors affecting the resident inflation expectations. First of all, make a theoretical analysis of the factors affecting inflation expectations and their inter mechanism of action and then constructed variable system. Second, using the central bank depositoi questionnaire survey data to measure the resident inflation expectations and the method proposed by Amir Kia and Hilde Patron (2004) to measure monetary policy transparency as well as data processing of the other variables. Finally, build SVAR model with exogenous variables, using the impulse response and variance analysis to explore the factors affecting inflation expectations of our residents and their role in size.To achieve the purpose, this paper uses three methods:First, the combination of theory and practice. Second, use descriptive statistical analysis and empirical method. Third, use dynamic analysis.The article draws the following main conclusions:First, our resident expectations did not commit an error in the long run. They did not overestimate or underestimate the actual rate of inflation.Second, ranking by the extent of the impact on inflation expectations is as follows:inflation expectations themselves, the change rate of the exchange rate, the actual rate of inflation, GDP growth, the change rate of international oil prices, the change rate of house prices, the change rate of M2money supply, monetary policy transparency.Third, inflation expectations react faster to the economy changes than the actual inflation. Variables affect the inflation expectations longer than the actual inflation about two quarters.Forth, Money supply changes on the resident inflation expectations had little effect, the impact of monetary policy transparency on inflation expectations of residents in our country is less significant than in Western countries.The possible innovations of the article are as follows:First, in the framework of theoretical analysis, this paper combines actual conditions to define the inflation expectations factors into endogenous and exogenous, then constructs the anticipated influence factor variable system. This paper will put money supply and exchange rate as endogenous variables, put international oil price and transparency of monetary policy as exogenous variables to construct a more detailed study framework.Second, in the measurement of inflation expectations, this paper uses different method, then choose the most suitable method to measure inflation expectations of residents in our country by comparison.Third, this article verifies the relative importance of factors affecting inflation expectations through empirical research method, then combine China’s reality to analyze the reason why money supply has a low impact on inflation expectations in empirical results.Due to limited time and capacity, the study is limited to Preliminary research. There is still more to be desired:First, Residents do not have the same interval of sensitive layer all the time. Carlson-Parkin probability method has stringent assumptions, using it to estimate inflation expectations is not a perfect way. Future scholars may consider adding time varying parameters to make the estimate more accurate.Second, consider that the data used in this paper is quarterly data, sample size is limited, so the selecting factors affecting the resident inflation expectations are limited. That is to say, the factors are not comprehensive enough. This may cause the ignore of other influence variables. Other factors that this paper has not yet to be discussed need subsequent scholars to probe.Third, it is just an indirect measurement to estimate the monetary policy transparency index by using SHIBOR overnight rate and the seven days bond repurchase rate. More or less there is interference of other factors, the transparency of the monetary policy better measurement methods have yet to be studied.