Author(s)

Jiachen Jiang, Yunshu Wang

Corresponding Author

Jiachen Jiang

Abstract

Consumer Price Index measures the average change in retail prices of more than 200 different types of goods and services over time. The relationship between the growth and fall of consumer price index has a far-reaching impact on the daily living standard of residents, the stability of economic system and the implementation of national policies. This paper is based on the importance of influencing factors of consumer price index. Based on the data of consumer price index, money supply and fixed assets investment in China from 1981 to 2015, this paper establishes a three-dimensional VAR model and uses the VAR model to analyze the influence factors of CPI and their degree of influence. It is found that the influence of money supply on CPI is very sensitive and strong, which indicates that monetary policy is the necessary and main regulation to effectively regulate the consumer price index. However, the impact of fixed assets investment on money supply is much smaller. It is believed that the role and effectiveness of regulating and controlling the scale of fixed assets in balancing China's price consumption index is small. Compared with monetary policy, fixed assets investment can only be used as a supplementary regulatory tool.

Keywords

Consumer price index, influence factor, VAR model, monetary policy