FAN Ganga, HE Lipingb, HU Jianic
Author information
a National Economic Research Institute, China Reform Foundation, Beijing 100081, China
E-mail: fangang@neri.org.cn
b School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China
E-mail: lphe@bnu.edu.cn
c School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China
E-mail: hujiani34@hotmail.com
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.
consumer price index (CPI) , producer price index (PPI) , price transmission
FAN Gang, HE Liping, HU Jiani. CPI vs. PPI: Which drives which？. Front. Econ. China, 2009, 4(3): 317‒334 https://doi.org/10.1007/s11459-009-0018-z