Does Rising Commodity Prices Pose an Inflation Risk

Abstract

In the context of rising commodity prices, this paper mainly analyzes the transmission between domestic upstream and downstream prices and the impact of commodity prices on upstream and downstream prices, and aims to study whether rising commodity prices will cause inflation risks. In this paper, a Vector Autoregressive Model (VAR) is constructed by using time series data of RMPI, PPI, CGPI, CPI and commodity prices in China, and it is founded through impulse response analysis that the upper and midstream prices in China have a significant dynamic transmission effect on the downstream prices, while the downstream prices have a reverse transmission mechanism against the midstream price and the midstream price on the upstream price.Based on this, this paper believes that there is an indirect dynamic transmission mechanism between the rise in commodity prices and the risk of inflation, and there is a transmission time delay, and it is necessary to pay close attention to the structural changes in consumer prices. Finally, relevant policy recommendations were proposed.