Study of Money Supply and Inflation based on Polynomial Regression

摘要

Inflation is a currently topic in China's national economic development.This paper studies the possible linkage between consumer price index (CPI) and the cash money in circulation (MO).We examine their scatter plot and find some complex dependence between the two variables.First we build parametric regression model, linear and polynomial.We also try some nonparametric model, LOWESS and LPE.Then based on some criterion and diagnostic procedures, we conclude that the cubic polynomial regression is the best choice.Finally, we analyze the corresponding economic problems.