Summary of the Reasons for China’s Inflation Occurred Graduate Students at Bangkok University

Abstract

For a long time, both the governments and economists are concerned with the problem of inflation, because as an important macroeconomic indicators, inflation is inextricably linked with macroeconomic operation. It is an “indicator” reflecting the market economy, it is also a “regulator” allocating the economic resources of the market. Figure 1 plots official statistics for Chinese GDP growth, urban consumption growth and inflation. Price stability has been the one of the pursuit objectives of national macroeconomic policy. In recent years, China’s various types of price index showed rising, as the level of prices not only involves the livelihood of the residents,the production of enterprises, but also the direction of the macro-control policies, thus prices again become the focus of attention. After using other scholars’ study for reference, the text studies the leading factors inducing the current inflation and their impact by using stationary text, cointegrating regression, error correction model, impulse response function. According to the study, we can find that there is a strict relation which is reflected in exchange equation among foreign exchange, broad money supply, exchange rate, total retail sales of social consumer goods and investment in fixed assets. It’s indicated that the increase of foreign exchange, total retail sales of social consumer goods and investment in fixed assets would pick up the inflation while the increase of exchange rate can reduce the inflation.