Dynamic Mechanism of Inflation Persistence in China

摘要

In this paper, VCAR(p) model is proposed, which is a general AR (p) model with its lag coefficient subject to the random walk model. By VCAR(3) model, CPI and RPI of China from lst 1994 to 11th 2007 are empirical analysis. Empirical results show that Inflation persistence in China has dynamic time-varying characteristics, and the inflation series may be a long memory process.Additionally, Comparing trend figure of inflation and its persistence in China, we find that their trend is very similar, and certain intrinsic mechanism may exist between inflation and its persistence in China.