Research on the Impact of Commodity Trade on China’s Inflation
|School||East China University of Science and Technology|
|Keywords||Commodity Trade Inflation Impact|
In recent years, as a complicated economic phenomenon, inflation has happened and is getting worse with the rapid development in China’s economy. Since 2003, China focused on development of industrialization and urbanization, and increased the huge demands of commodities such as energy and raw materials as well. Many scholars believe that the general rise of commodity prices in international market is one of the main reasons of the recently twice imported inflation. Therefore, the study of relationship between current status of bulk commodity trade and the worsening imported inflation in China has both great practical and policy significance to the health of our economy and social stability.This paper, based on the previous studies, took Oil, Iron Ore and Soybeans as the three highly dependent commodity represents for examples. After the introduction of research meaning, theoretical basis and reality, this paper used data and phenomenon to analyze the existing inflation in China and the pathway map of three commodity price shocks on China’s CPI and PPI, and then derived the impact of bulk commodity on China’s price level theoretically. For further validation, this paper used Vector Autoregressive Model (VAR) to fit the data, and analyzed the influence of foreign impulses on China’s price level in future through Impulse Response Function and Variance Decomposition Function. The results showed that the CRB index has remarkable and sustained positive response to PPI and the contribution was up to 40%; Oil price has prominent impact on China’s inflation, it not only positively contributed 40% to PPI for 7 or 8 months, but also transfer to CPI since the forth month; Soybeans is the only one which has stable and long-term impact on CPI. Finally, the paper proposed countermeasures to ease China’s imported inflation due to bulk commodity trade, which meanly in two ways——strive for international commodity pricing and reduce external dependence.