Financial sector in the formation of the grounds for rising prices has been, and there is no consensus. Keynesian positions that the existent economic system is extremely unstable. The labour markets are the root of rising prices, and therefore deduce the celebrated Phillips curve. Monetary school believes that rising prices is basically a pecuniary phenomenon. While the market is basically stable, it is no demand for authorities to unnaturally set. The usage of macroeconomic policies, rising prices, construction, school tried to economic productiveness of assorted sections to explicate the long-run tendencies are inconsistent monetary values and the ensuing rising prices. These three schools of idea in theory, to some extent explain the causes of rising prices. But it can non to the full explain the formation mechanism of rising prices, and given the corresponding policy recommendations. Inflation is a comprehensive economic phenomenon, instead than single-factor effects. In this paper, econometric methods, the usage of ADF theoretical account ( Augmented Dickey-Fuller trial ) and the Granger causality trial ( Granger Causality Tests ) theoretical account, from the GOP Growth, M1 Growth, Consume Growth, Wage Growth, Exchange Rate these economic indexs Inflation Rate in consequence to analyse the causes of rising prices.

## 2. Analysis

In the time-series instance, the two economic variables X, Y Granger causal relationship between the defined as follows. If the variable contains the X, Y under the conditions of the past information on the prognostic variable Yttrium is superior to merely divide from the Y ‘s past information Y for anticipation. In other words the variable Ten helps to explicate the hereafter alteration in the variable Yttrium is considered a variable Ten is caused by the variable Y Granger causes. Granger causality trial is basically proving whether a variable slowdown variables other variables could be introduced into the equation. If a variable is capable to the delayed impact of other variables, claimed that they have Granger causality.

Two braces of and clip series, based on Granger ‘s definition, if compared with the past merely the value of to foretell when the ‘s past values of can be used to better the prognosis. That is, if the past values of can statistically better the anticipation is said to do in. Granger causality trial can non merely long-run relationship between the variables tested, but besides on the short-run relationship between the variables tested. There is no unit root for the two stationary series, can be defined the undermentioned equation:

A?A?E†1A?A?aˆ°

From to to prove the causal relationship, viz. , , void hypothesis testing.

Hypothesis.Alternative hypothesis

If you accept the original hypothesis, so there is no causal link from to relationship. On the other manus, from to, so there exists a causal relationship.

Granger causality trial for a pre-condition that the clip series must be stationary, or may be a false returns. Therefore, it was transporting out Granger causality trial before the first response to the assorted indexs of stableness of clip series to carry on a unit root trial ( unit root trial ) .ADF trials were used to smooth sequences of assorted indexs to carry on a unit root trial.

3. Empirical Analysis

Paper selected 1980-2007 Year Inflation Rate ( IR ) , GOP Growth ( GOP ) , M1 Growth ( M1 ) , Consume Growth ( CONSUME ) , Wage Growth ( W ) , Exchange Rate ( EX ) 6 variables, 28 samples the figure of the survey. Eviews6.0 calculated utilizing the package. Inflation Rate ( IR ) , GOP Growth ( GOP ) , M1 Growth ( M1 ) , Consume Growth ( CONSUME ) , Wage Growth ( W ) , Exchange Rate ( EX ) 6 variables of the line graph the figure below.

Figure 1

## 3.1 Unit root trial

In clip series analysis, to avoid “ specious arrested development ” phenomenon, in making causality analysis, the demand for variable ADF trial ( Augmented Dickey-Fuller trial ) . Test consequences shown in Table 1:

TABLE 1 Unit root trial

Variable

Augmented Dickey-Fuller trial statistic

Test critical values

1 % degree

5 % degree

10 % degree

Iridium

-3.180069

-3.711457

-2.981038

-2.629906

I ( 0 )

GOP

-3.254578

-3.737853

-2.991878

-2.635542

I ( 0 )

M1

-4.337122

-3.711457

-2.981038

-2.629906

I ( 0 )

CONSUME

-5.318454

-3.711457

-2.981038

-2.629906

I ( 0 )

Tungsten

0.651459

-3.769597

-3.004861

-2.642242

I ( 1 )

D ( W )

-5.975410

-3.769597

-3.004861

-2.642242

I ( 0 )

Ex-husband

-1.661010

-3.699871

-2.976263

-2.627420

I ( 1 )

D ( EX )

-4.669889

-3.711457

-2.981038

-2.629906

I ( 0 )

IR ( Inflation Rate ) , GOP Growth, M1 Growth, C Growth ( Consume Growth ) , the sum of the ADF trial at the 5 % significance degree less than the corresponding critical value, there is no unit root, is smooth. The W Growth ( Wage Growth ) , EX ( Exchange Rate ) the sum of ADF trial at the 5 % significance degree is greater than the corresponding critical value, there are unit root is non smooth, but the first-order differential sequence of ADF values are less than 5 % significance degree the critical value, bespeaking they do non be unit root, is a first-order stationary

## 3.2Granger Causality Trials

As the W Growth ( Wage Growth ) , EX ( Exchange Rate ) is a stable order, so DW severally, said W Growth ( Wage Growth ) first-order derived function, DEX that EX ( Exchange Rate ) of the first-order derived function, and individually GOP, M1, CONSUME, DW, DEX and IR for Granger Causality Tests, trial consequences shown in Table 2

Table 2 Granger Causality Trials

Null Hypothesis

Ob river

F-Statistic

Prob.

GOP does non Granger Cause IR

25

3.61448

0.0334

IR does non Granger Cause GOP

1.99679

0.1506

M1 does non Granger Cause IR

25

13.2070

8.E-05

IR does non Granger Cause M1

0.21912

0.8818

CONSUME does non Granger Cause IR

25

0.40692

0.7499

IR does non Granger Cause CONSUME

0.74334

0.5401

DW does non Granger Cause IR

24

2.36992

0.1025

IR does non Granger Cause DW

5.02768

0.0101

DEX does non Granger Cause IR

24

0.95259

0.4375

IR does non Granger Cause DEX

0.81532

0.5030

Harmonizing to AIC and the SC minimal rule to find the optimum slowdown order is three, the corresponding consequences can be seen GOP and the M1 are the grounds for IR, but CONSUME, W, and EX are non the grounds for IR, bespeaking GOP and the M1 have an impact on rising prices.

## 4. Drumhead

This paper analyzes the Inflation Rate ( IR ) , GOP Growth ( GOP ) , M1 Growth ( M1 ) , Consume Growth ( CONSUME ) , Wage Growth ( W ) , Exchange Rate ( EX ) the relationship between the usage of ADF trial and Granger causality trial empirical analysis of assorted factors, analysis found that:

First, GOP Growth, M1 Growth in front of rising prices and alterations in the motion, so GOP Growth, M1 Growth Inflation in China has a sense of Granger causality. However, Consume Growth, Wage Growth, Exchange Rate and rising prices causality is non obvious.

Second, M1 Growth and Inflation Rate exist between the relationships between alterations in the same way. M1 Growth and the impact on rising prices there is a certain slowdown, which shows rising prices is basically a pecuniary phenomenon