Research on the Relationship between Interest Rate and Price Based on Functional Data
Price stability is the ultimate goal of most central banks.An accurate grasp of the rela-tionship between prices and interest rates is of great significance for the central bank to formulate and implement monetary policy.Based on the monthly data of interest rates,Consumer Price Index(CPI)and Producer Price Index(PPI)in each province of China from 2011-2019,this paper introduces a func-tional data analysis method,which analyzes the continuous fluctuation characteristics of the three index functions,and study the correlation between interest rates and CPI,interest rates and PPI,as well as the comparative analysis of their canonical correlation.The results show that(1)The fluctuation of interest rate and price in each region showed obvious cyclical characteristics,but there were great differ-ences among provinces and regions.(2)Compared with CPI,PPI is more correlated with interest rate fluctuations.(3)The fluctuation of interest rate and PPI showed pro-cyclical characteristics,while the fluctuation of interest rate and CPI showed counter-cyclical characteristics.The analysis shows that the central bank should strengthen the study of interest rate and price cycle,and enhance the forward-looking interest rate control policy;and should take advantage of the strong fluctuation law of current interest rate and PPI to improve the effect of monetary policy.
interest rateConsumer Price IndexProducer Price Indexfunctional data analysis
NETL
NSTL
万方数据
