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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2009, Vol. 4 Issue (3) : 317-334
Research articles |
CPI vs. PPI: Which drives which?
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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      
Issue Date: 05 September 2009
 Cite this article:   
. CPI vs. PPI: Which drives which?[J]. Front. Econ. China,2009, 4(3): 317-334.
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