Dynamic causality between PPI and CPI in China: a rolling window bootstrap approach

Sun, J., Xu, J., Cheng, X., Miao, J. and Mu, H. (2021) Dynamic causality between PPI and CPI in China: a rolling window bootstrap approach. International Journal of Finance & Economics.

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Abstract

The relationship between PPI and CPI is one of the hotspots in the study of macroeconomics. Taking China as an example, the paper tests dynamic causality between PPI and CPI during the period of 2000:M1‐2019:M12. In view of structural mutations in time series variables, the bootstrap rolling‐window causality test is applied to restudy the dynamic causal relationship. As a result, it exists bidirectional transmission mechanism between CPI and PPI, both positive transmission of PPI to CPI and reverse transmission of CPI to PPI. In addition to putting more emphasis on transmission mechanism and causality between PPI and CPI, formulation of macroeconomic policy needs to focus on the correlation between PPI and CPI, and then the government can implement more targeted measures, such as strengthening the comprehensive application of monetary policy and fiscal policy, further deepening the supply‐side reform, optimizing the industrial structure to strengthen internal relationship between CPI and PPI.

Item Type: Article
Keywords: bootstrap, CPI, dynamic causality, PPI, rolling window
Divisions: Food, Land and Agribusiness Management
Depositing User: Mrs Rachael Harper
Date Deposited: 04 Mar 2021 16:03
Last Modified: 04 Mar 2021 16:03
URI: https://hau.repository.guildhe.ac.uk/id/eprint/17649

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