Structure Analysis and Transmission Mechanism of the Relationship between PMI and PPI based on EEMD-JADE

Research Objectives:Construct the conduction mechanism between the structure components of PMI and PPI.Research Methods:Decompose PMI and PPI with the ensemble empirical mode decomposition(EEMD)method to obtain fixed base sequences as observed signals,then apply Joint Approximate Diagonalization of Eigen-matrices(JADE)to extract independent signal component sequences,and use run length judgment method to reconstruct structure components of different frequencies.Finally,we take Granger causality test on them.Research Findings:Three structure components of high,medium and low frequency,reconstructed by PMI and PPI,represent the short-term,medium-term and long-term volatility respectively.The Granger causality test shows that,in high frequency components PMIH and PPIH are the interrelationship of cause and effect,and the conduction time is 1month.In medium frequency components only PMIM is the Granger cause of the PPIM with4 phase in advance.And in low frequency components only PPIL is the Granger cause of the PMIL with 10 phase in advance.Research Innovations:Introduce the time frequency analysis method EEMD-JADE into economic field.Research Value:Provide guidance and theoretical basis for the quantitative control policy of economy.