The Nonlinear Price Transmission between CPI and PPI: Production Chain and Price expectation
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| Title | The Nonlinear Price Transmission between CPI and PPI: Production Chain and Price expectation
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| Author | Sun Jianqiang, Cui Xiaomei and Cai Yumei |
| Organization | School of Economics and Commerce, South China University of Technology |
| Email | jqsun@scut.edu.cn；15811879342@163.com；ymcaimath@163.com |
| Key Words | Consumer price index; Producer price index; Price transmission |
| Abstract | This paper investigates the transmission machenisms underlying the links between CPI and PPI, production chain and price expectation. A nonlinear chaos model (MNMG) is proposed to examine the linear and nonlinear links between CPI and PPI. MNMG model is empicailly shown to overwhelm the linear methods (VAR/VEC) and nonlinear methods (TVAL/Tn) which are usually used to examine the causality between CPI and PPI. Empirical evidence shows that CPI responds to the changes of CPI at a time lag of 1-4 momths, PPI responds to the changes of CPI at a time lag of 1-2 months. Both the machenisms, producton chain and price expectation, drive the links, but the latter plays a more sinificant role. The results suggest a deflation expectation management for the current deflation in the industry section in Chinese economy. |
| Serial Number | WP1036 |
| Time | 2016-03-18 |
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