1、1Is Chinese Inflation Imported？Researches Basing on the Data from 2006 to 2008Abstract. The international trade makes all economies affected by the international disturbances， so some scholars advocate that inflation occurred in any economies may be the imported inflation. The paper puts forward a d
2、istinct idea for studying the imported inflation. Basing on the data of inflation from 2006 to 2008 in China， the paper tests whether the Chinese inflation is imported， and concludes that the changes in prices of steel， machine and electron and light industry products cause the changes in prices of
3、import goods， and further changes of Chinese inflation rates. So the main reasons of Chinese inflation during 2006-2008 should not be regarded as imported. Key words： imported inflation， accumulative effect 1 Introduction There are two completely different views about the reasons of inflation in aca
4、deme. Monetarism considers the inflation only as a monetary phenomenon and affirms that the only reason of inflation in a country is the over issue of the fiat money. 2However， another view considers that the import prices can induce domestic prices， so economic globalization and international trade
5、 make the inflation in a country influenced by the globalization and international trade， the reason of inflation lays not in international facts and call the inflation imported one . Since 2006， China experienced serious inflation， and some scholars advanced the inflation in China was imported . If
6、 the inflation in China during the period was imported one， then whether the strategy through which the central bank wants to control the inflation is effective is doubtful. So it is significant to understand that whether reason of inflation experienced in Chine is imported one. 2 LITERATUREREVIEWS
7、Since 1980s， with the development of international trade， the inflation in individual country had turned out to be the trend of reducing generally. Some economists think there must be certain relationships between these two phenomena， and began to pay attention to influence of international trade an
8、d globalization on the inflation. For instance， Fischer （2005） propounded that the inflation experienced by a country not only relied on the output of own country， but also the output gap 3of the trade partner. Thus， the inflation should be the imported. However， British famous magazine The Economis
9、t （2005） propounded that gradually increasing international trade made the traditional economic model of inflation being ridiculed， because it neglected the economic globalization. Some scholars even thought the economic globalization can not only be used to explain the reasons of the inflation， but
10、 also all the economic phenomena. For example， Greenspan （2005） propounded that the globalization will be the basis factor to explain any economic affairs during the past ten years. As for the reason why inflation is imported， many investigators have given out different explains from different point
11、s of view. For instance， Modigliani and Papademos（1976） ， Tobin（1975）and Cagan（1980） thought that the unreasonable monetary policy in a country leaded the inflation to be imported. When the international factors lead the domestic prices going up， the economic organizations in the country will ask fo
12、r the central bank to increase the currency supply， in order to obtain the outer factor leads to inflation. This saying is similar to conversely forced theory in China. However， Rogoff（2006） thinks， global competition makes the wage and price level more flexible， which makes the Philips Curve steepe
13、r， and the 4fixed output increasing will lead to higher inflation. Ball and Mankiw（1995）explained as follows that comparing with domestic country， if the relative price is extremely bigger in the foreign countries， the price changes will effect more to the inflation for the domestic country. Accordi
14、ng to their study， the reason why gas can be a most important international factor to effect the inflation is that gas may bring the great change of the relative pricing annually. However， for the question whether the inflation is imported， several scholars have propounded different opinions. The mo
15、netarists think that the inflation is always monetary phenomenon whenever and wherever. The unique reason of inflation is over issue of currency， not the foreign factor. Mundell（1961）suggested that if every country carried out the floating exchange rate system， then the foreign economic impacts will
16、 be shielded by the exchange rate floating. Thus， according to Mundells study， imported inflation was impossible. Studying from experimental view， Laurence （2006） concluded that international trade does not affect inflation level and dynamic structure in long term， and neither negatively affect to t
17、he inflation. That is to say， international factors have no effect to the inflation in 5individual country. Facing the conclusions of Rogoff（2006） ， Yellen（2006） had found that USA and other countries Philips Curve had exactly affected by the international factor， not becoming stepper， but flatter.
18、That is to say， certain output increase leads to the less inflationary effect. Ihrig et al （2006） had doubted the importing style inflation from the practical view. Their research found that if relaxing the assumption， the inflation effect caused by the outer gap of output will disappear in most cou
19、ntries. As for the question whether the inflation is imported， there are also a couple of eclectics. They do not argue if the inflation is imported or not from the theory views， but scale the international factors influence on the inflation. They think that under economic globalization today， its re
20、ally hard to imagine that one countrys economy can shield the impacts from the international factor. But if the inflation caused by the international factor is not so big， we can not say the inflation is imported one. Thus， the key point is not whether the inflation of the country is affected by the
21、 international factor， but the effected degree. For example， Weintraub（1976）research found that import price has explained why USA consuming price rise by 44% from the year 1943-61944；Levy（1978）research found that， from the late year 1971-1974，almost 60% inflation in the USA due to the impacts of in
22、ternational factor. And Yellen（2006）research found that globalization affects is only gentle， and Kohn（2006） research found that the globalization affects to the individual countrys inflation is generally limited. As for the question whether the inflation is imported， although currently the research
23、es are different， there would be one key point to be the same， that is to say， the researches have put the inflation rate regressed by domestic total requirement and importing price change rate， and use importing price to express the impact of international factor， in order to measure if the inflati
24、on is importing style， for instance， Weintraub（1976） ，Levy（1978） ，Yellen（2006）and Kohn（2006） ，their researches are also the same. 3 THOUGHTS OF THIS PAPER If we consider the country individually， the changes in import prices exactly affect the domestic inflation， and finally get the conclusion that
25、the inflation is imported. However， when we consider the matters using the connection view， the things will be totally different. During the international trade， while domestic import prices are the 7foreign countrys export prices， and domestic export prices are foreign countrys import prices. If th
26、e domestic price level affects by the foreign import prices， then the foreign price levels are also affected by the export prices. The increase in domestic export prices has increased the foreign countrys import prices， and which will transfer to the foreign the price level. That is to say， there wo
27、uld be some feedback relationship between domestic export prices and foreign importing price. Thus， Weintraub（1976）and Levy（1978）had figured out that in the USA during the certain period of inflation， the effect caused by international factor is approaching around 50%， and had concluded that the inf
28、lation is importing style. Their conclusion is acceptable. But Yellen（2006）and Kohn（2006） believed that since the effect is not so outstanding， the inflation is not the importing style， which will be questionable. When we consider the feedback relationship， the initial small pricing change will lead
29、 to huge accumulative effects. Thus， we have to distinguish the price accumulative effects to judge whether the inflation is imported one. Besides ， it is doubtful to allege the inflation to be imported one only basing the fact that the changes in foreign import prices induce the changes in 8domesti
30、c inflation. While considering the price feedback effects， the key reasons which lead the domestic country inflation are the increase in domestic country export price， not the import prices. Since there would be recycled relationship among domestic country inflation， domestic exporting price and for
31、eign exporting price， then， even we prove like Weintraub（1976） and Levy （1978） ， the foreign export prices explain the mostly domestic inflation， we can not assert that the inflation is importing style， because the reason why domestic inflation importing price change may initially come from the dome
32、stic exporting prices， not the foreign countrys. Therefore， in order to distinguish if our countrys inflation is importing style， we have to check the following three points： 1st， the price accumulation effects between our country and main trade partners； 2nd， the granger relationship between our co
33、untrys exporting and importing price； 3rd， the relationship between domestic importing price and inflation. If the inflation is importing style， the inspection results should meet the following requirements： 1st，the price accumulation effect is outstanding；2nd，the domestic exporting price is not the
34、 reason which leads the 9foreign exporting price change； 3rd，domestic importing price is the reason which cause the domestic inflation. If meets these 3 requirements， it shows that the domestic inflation is caused by foreign exporting price change， and foreign exporting price change has nothing to d
35、o with domestic， thus， the inflation is importing style. 4 STATISTIC MEANS OF ACCUMULATIVE EFFECT We suppose that the price of output of country at the time is which could be function of value increment and prices of input coming from all other countries. Let denotes the right of input of country co
36、ming from country . So denotes the right of input of country coming from country . We consider three-season lags of influence of input prices. The influence of current and previous two periods can be defined as 、 、 . Then for the country ， output price is ： As to the influence of import prices on do
37、mestic prices， we calculate it through tow steps. The first we calculate the initial influence of changes in import prices on domestic prices through calculating the increase in domestic cost caused by changes in import prices. Second， for every country， the given initial changes in prices， the infl
38、uence of import prices on inflation of all countries is decided by equation 10（1）. We can solve equation （1） by recursive means. For simplicity， we can use matrix to express. Because the key purpose of this paper is to test the influence of import prices on domestic prices， we can suppose value incr
39、ement is constant. The lagged influence of import prices form a set of triangle matrix， in which key diagonal of matrix is ， ， ， and the other elements equal to zero. By the same means， we can get the key diagonal of matrix and . The matrix of right of input coming from foreign trade partners is . T
40、he prices of output form a vector ， and the equation expressed by matrix is： The initial influence of changes in prices of imported goods （ ） on output prices of every country can be expressed by the vector . To integrate all these effects， we add into equation （2） ， and get following equation through solving： is identity matrix. By averaging the changes in prices of all countries， we can get total changes in prices . Through adding into final demand， we get： The accumulative effect of changes in prices is： The initial changes in prices of input can be expressed as： Because of ， we get：
