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Research on the Relationship between CPI and PPI Based on VEC Model

DOI: 10.4236/ojs.2019.92016, PP. 218-229

Keywords: VEC Model, Consumer Price Index, Producer Price Index, Impulse Response Function

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Abstract:

By establishing the VEC model, the relationship between Consumer Price Index (CPI) and Producer Price Index (PPI) is explored by using Johansen cointegration test and impulse response function. The results show that there is a long-term equilibrium cointegration relationship between CPI and PPI. CPI has a certain impact on PPI. PPI also has a certain impact on CPI. PPI has a great impact on itself both in the long-term and short-term. The current CPI will be adversely affected by the previous CPI and the positive impact of the previous PPI. The current PPI will be positively affected by the previous phase of CPI and the previous phase of PPI.

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