Based on the China seasonally adjusted monthly chain price indexes, the VAR model has been used in the research on the transmission mechanism of market price. Empirical results show that MPI, PPI, CPI monthly chain index are not smooth series, but with cointegration relationship in China, and a long-run equilibrium relationship exists among them. Then Granger causality test and impulse response function analysis is applied into the VAR model based on them, and the conclusions are as follows: there is a demand-pull characteristic in China price transmission, and the effect of transmission from CPI to PPI is very obvious, but has two months lag, the transmission from PPI to MPI has the same effect. In addition, the impact of transm-ission from CPI to PPI is gradually stable after three months, and the stabilization time of transmission from PPI to MPI is four months. And then the market prices have entered a new equilibrium. The conclusion shows that the market price is influ-enced by demand in current time, the price fluctuations in the consumption area will have an impact and influence on the whole industrial chain price, and the CPI has become the leading indicators in the price fluctuations.
