China's Core Inflation Index:Index Calculation And Its Validity Test

Inflation is an important indicator that reflects the macroeconomic situation of a country and is closely related to a country's level of economic development,social stability and the living standards of its residents.Accurately measuring inflation is the basic premise for the Central Bank to implement effective monetary policies,control inflation,and stabilize prices.At present,the consumer price index(CPI),the core measure of inflation in China,is biased in measuring the overall level of inflation,which cannot accurately reflect the real inflation level.It is easy to cause the monetary authorities to misjudge the inflation situation,weaken the effectiveness of monetary policy,and influence the stability of the macro economy.This paper analyzes in depth the consumer price index(CPI)on the basis of measuring the "distortion" phenomenon of price,proposes the concept of core inflation to amend the current inflation target.This paper based on the universality and persistence definition of core inflation,generalizes the definition and measurement method of induction,to explore the effectiveness of the core inflation below provides the research object.Secondly,from the definition of inflation,it summarizes the shortcomings of CPI in measures of inflation,and explains the necessity of constructing core inflation index.Then,the basic principle of estimating core inflation index of SVAR model is briefly introduced,and the mathematical model is constructed based on the neoclassical framework,and the quantitative relation between core inflation level and output growth rate,money supply growth rate and short-term deviation rate of heterogeneous commodity price is derived,which provides theoretical basis for the variable selection of the core inflation index estimation model.Subsequently,this paper constructs a SVAR model containing the four variables of output,CPI,money supply and food price to calculate the core inflation index of China and give full disclosure.The basic property test,the attractor test and the forecasting ability test show that the index is an effective measure of the core inflation.Compared with the CPI,the core inflation index can more accurately reflect the cyclical characteristics and long-term trends of price changes in our country.It is of great value to the central bank in formulating monetary policies,grasping the future trend of inflation and guiding the public to expect.The central bank macro-control should comprehensively consider a variety of price indicators,including the core inflation index and CPI,to stabilize prices in the short-term fluctuations at the same time,pay more attention to guide long-term price trends.