Factor Analysis on Consumer Price Index Rising in China from 2005 to 2008

It is found that the food price rising are the main reasons to promote the overall price level from operational features of the consumer price index (CPI). The food and energy supply shortage and pork price rising are the direct reason of the China price index rising recently. We study the dynamic relations among money supply growth, deposit reserve ratio, raw materials price and CPI index through the establishment of the VAR model. Using the impulse response function we analysis the impulse response which the consumer price inflation rate, consumer price index and raw materials receive the impulse by each endogenous variable. Finally, we evaluate the VAR model and draw some valuable conclusions.