earticle

영어

One of the significant impacts of the coronavirus disease 2019 (COVID-19) pandemic on the economy is the large fluctuations in price levels. Moreover, since 2022, the impact of the Russian-Ukrainian conflict has been superimposed, and global inflationary pressure has increased further. Therefore, the imported inflation pressure faced by China has increased significantly. Hence, this study examines whether there is imported inflation in China and profoundly investigates the transmission path of China’s imported inflation as a breakthrough to complete this study. Imported inflation refers to the phenomenon that, under the condition of an open economy, price changes in the international market lead to inflationary pressures in a country’s domestic economy through commodity and monetary channels. The commodity path is mainly based on changes in asset prices. Specifically, in terms of commodity path, the transmission mechanism of imported inflation is expressed as “changes in foreign market prices → changes in prices of imported commodities → changes in costs and prices in domestic open economic sectors → changes in costs and prices in domestic non-open economic sectors → changes in the general domestic price level”. Another transmission channel is the monetary path, the massive inflow of foreign capital. Inflationary pressure is caused by a passive increase in the money supply caused by the inflow of foreign capital. This study uses monthly data from January 2008 to July 2022 to construct a vector autoregressive (VAR) model and uses the Granger causality test method to analyze deeply the causes of inflation in China. This study uses consumer price index (CPI) and producer price index (PPI) to represent China’s inflation level. Meanwhile, this study selects the CRB index to represent the commodity channel factor of imported inflation. In addition, foreign direct investment (FDI) can reflect the impact of international capital flows on China’s imported inflation. Thus, this study uses FDI to represent the monetary channel factor of imported inflation. Moreover, the impact of different types of international commodity prices on domestic inflation may be inconsistent. Therefore, this study also adopts two sub-indices of the CRB index, namely the CRB primary industrial products sub-index and the CRB metal sub-index for robustness testing. This study carried out the stationarity test of the variables. The method adopted is the ADF test to verify the long-term stable relationship of each time series variable. In this way, this study performs VAR model regression on stationary time series variables. Furthermore, this study uses the Granger causality test to determine the causal relationship between variables and the direction of influence. Results show that the commodity channel factor can predict China’s inflation rate. Conversely, the monetary pathway factor has no predictive power for China’s inflation rate. This result shows that global inflation is mainly imported into China through commodity channels rather than monetary channels. The results of the robustness test again show that the commodity channel factor has a significant impact on China’s inflation. Therefore, China’s inflation presents an import-oriented feature dominated by the commodity channel.