Study on the Transmission-Mechanism of International Factors Influencing Chinese Price Level

After the reform and opening, the economic relationship between China and the world is strengthened heavily. Theoretically, international factors have impact on the domestic general price level through a set of channels. This paper employed a sample including monthly data of five representative indicators, to explore the influence of international factors on Chinese price level. The empirical results showed that there is an obvious lag for Chinese CPI reacting to international shocks, while the PPI reacts immediately. The impact of international factors on Chinese CPI and PPI usually lasts 12 months at least and they always exhibit a different transmission mechanism for international shocks. Besides, a further study revealed that some structure-breakpoints in the influence mechanism of international factors exist, and great changes of the impact direction and significance for different factors have taken place in the subsample periods.