With the development of economy, more and more attention is paid to the relationship between money supply and inflation in the economic field. This paper chooses consumer price index (CPI) as an important index to measure the level of inflation, by choosing between January 2008 and March 2019 money in circulation M0, narrow measure M1, broad measure M2, consumer price index CPI monthly data as sample, building a vector autoregressive (VAR) model and using econometric methods of impulse response function and variance decomposition, and finally characterizes money in circulation M0, narrow measure M1, broad measure M2 and the relationship between consumer price index CPI and different sizes of the impact of inflation in the money supply relationship.
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