Analysis Of Influential Factors Of China’s Inflation Based On State Space Model

Inflation is a major issue related to a country’s political and economic stability,and serious inflation may even cause social unrest.Therefore,it is of practical significance to explore the impact mechanism of inflation.China is a big developing country with complex national conditions and a very complicated international environment.The impact of changes in various economic factors will have an impact on China’s economy,even serious inflation.Therefore,this paper comprehensively analyzes the factors affecting inflation at various levels,and adopts a state space model with variable coefficients to analyze.At the same time,the effects of various influencing factors on inflation in the entire sample interval are also studied,which is more practical than the general multiple regression model and VAR model.This paper mainly uses quantitative analysis methods,collecting and collating data on influencing factors at various levels from January 2000 to October 2019,and analyzing the influence degree of each influencing factor through the change trajectory of each coefficient in the model results.The conclusions are as follows:(1)There are three distinct stages of inflation in the sample interval: In 2002-2005,China’s inflation was mainly affected by the output gap GDP,the international commodity price index PCPI,and the income RS.Among them,GDP has the greatest impact,and the international commodity price index and income also have a significant impact,but it is lower than GDP,that is,China’s inflation at this stage is mainly demand-based inflation.From 2006 to 2009,China’s inflation was mainly affected by industrial producers.The impact of the purchase price index PPIRM,exchange rate ER,international commodity price index PCPI,GDP,the most significant of which is the exchange rate factor,and the industrial producer purchase price index,GDP,and international commodity price index have a greater degree of impact,which indicates that China’s inflation at this stage was mainly caused by input factors,but demand and cost also played a driving role.From 2010 to 2012,China’s inflation was mainly affected by exchange rate ER,industrial producer purchase price index PPIRM,and GDP.The impact of exchange rate is the largest,followed by GDP and the purchase price index of industrial producers,and the impact of GDP is higher than the purchase price index of industrial producers,indicating that China ’s inflation at this stage is still dominated by input,and demand and cost factors are also mixed.(2)In a relatively long period of time,GDP,exchange rate,total retail sales of consumer goods,industrial producer purchase price index and international commodity price index have a significant positive impact on China’s inflation,which indicates that China’s inflation is mainly affected by demand factors,Cost factors and input factors,other factors have less influence.In the near future,the influence of money supply,stock market,and income factors on inflation has a trend of increasing.