CPI vs. PPI: Which drives which£¿

Gang Fan (), Liping He () and Jiani Hu ()
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Gang Fan: National Economic Research Institute, China Reform Foundation, Beijing 100081, China
Liping He: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China
Jiani Hu: School of Economics and Business Administration, Beijing Normal University, Beijing 100875, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2009, vol. 4, issue 3, 317-334

Abstract: 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.

Keywords: consumer price index (CPI); producer price index (PPI); price transmission (search for similar items in EconPapers)
JEL-codes: C22 E31 E37 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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