This paper collects the monthly data of the price index of 36 cities in China from January 2015 to July 2013. Based on VAR model, empirical analysis is made on the collected data .The results show that there really have some relationships between CPI and PPI on Chinese data. First, there exists mutually Granger causality between CPI and PPI. Second, there is a long-term equilibrium relationship between CPI and PPI. Third, CPI and PPI will immediately produce a response on the impact of random disturbances in the system, and the differences between them are the length of the reaction, such as, the disturbance response on PPI to CPI is obvious, and that on CPI to PPI is NOTobvious. The influence degree on PPI to CPI is about 49%, and the influence degree on CPI to PPI is about 2.9%.
Prof. Dr. Bilal BİLGİN