The Shock Effect Study on the Impact of Financial Policies and Fiscal Expenditures on the Agricultural Products’ Prices in China

Wen YI

doi:10.3968/%x

The Shock Effect Study on the Impact of Financial Policies and Fiscal Expenditures on the Agricultural Products’ Prices in China

Wen YI

Abstract

According to the monthly data of agricultural products’ prices index from 1999 to 2012 and the related information about financial policies in China, the time series analysis methods has been made use and also I built a vector auto regression (VAR) model and vector error correction model (VECM) to finish the empirical analysis of impact factors on agricultural products .It is shown that money supply shock has a statistically significant impact on China’s agricultural products’ prices. The results indicate that: (a) In the long term, the growth of M0 will lead the fluctuations in the prices of agricultural products, while in the short term ,the supply of M2 and M1would play an important role. (b) In the long run, the prices of agricultural products in China have been subject to the level of fiscal expenditures and the exchange rate. But in the short term, the impact of the exchange rate is not significant. (c) By using Granger causality test method, the relationship between broad money supply (M2) and agricultural products’ prices is bidirectional. At last of the paper, some policy recommendations have been put forwards.

Keywords

Fluctuations of agricultural products’ prices; Financial policies; Granger causality test; VAR model

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