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CPI vs. PPI: Which drives which£¿

Author

Listed:
  • FAN Gang

    (National Economic Research Institute, China Reform Foundation, Beijing 100081, China)

  • HE Liping

    (School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China)

  • HU Jiani

    (School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China)

Abstract

The consumer price index (CPI) and producer price index (PPI) are interrelated but significantly different concepts. Relationships between the two indices may be that of causality or non-causality. The paper conducts a Granger-causality test on China’s CPI and PPI data for the period from January 2001 to August 2008, and finds that CPI Granger causes the change in PPI, and the latter reacts to the former with a time lag of 1–3 months. The result may suggest that in contemporary Chinese economy, demand-side factors have played a more important role than supply-side factors, although the two sides both have influences on domestic inflation trend which is measured by CPI.

Suggested Citation

  • FAN Gang & HE Liping & HU Jiani, 2009. "CPI vs. PPI: Which drives which£¿," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 4(3), pages 317-334, September.
    • Handle: RePEc:fec:journl:v:4:y:2009:i:3:p:317-334
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-009-0018-z
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    Citations

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    Cited by:

    1. Yusuf V. Topuz & Hassan Yazdifar & Sunil Sahadev, 2018. "The relation between the producer and consumer price indices: a two-country study," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(3), pages 122-130, June.
    2. Ivo da Rocha Lima Filho, Roberto, 2019. "Does PPI lead CPI IN Brazil?," International Journal of Production Economics, Elsevier, vol. 214(C), pages 73-79.

    More about this item

    Keywords

    consumer price index (CPI); producer price index (PPI); price transmission;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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