The empirical analysis in short term on the relationship with money supply and price level in China

Public keep general attention with the rise of the price level in near two years, especially the variation regard to consumer price index, meanwhile central bank have executed tightening of monetary policy for many times in order to solve the excess liquidity .Public forms the expection of inflation through the new phenomenon about price level rises. This article will adopt the explanation of inflation which is from monetarism school and the theory of Keynes monetary transmission mechanism. Through the analysis of datas of money supply and CPI in every month during 2006 to 2007, exploring the relationship between money supply and phenomenon about price level rises at present. The positive analysis show the price level rose was not caused by money supply amount movement and was caused by the cost of external input.