Nonparametric Model Of The Financial Asset Price Volatility And Its Application Research

Ever since financial crisis, central banks all over the world have realized that it is notsufficient to ensure macroeconomics stability only through economic growth and price stability byinflation management, as a stable status of all the key functions of the financial system effectivelyimplemented, the coordinated development between financial market and real economy, theefficiently procession in financial market of key partition such as resource allocation, riskmanagement, settlement and so on, the shock-absorbing and interference resistance ability fromexogenous uncertainty, financial stability has gradually become the primary policy objective ofcentral banks.Since the accession of WTO, Chinese financial system has faced massive risk and challenge,aside with price stability, economic growth, maintaining financial stability has become a criticalpolicy target from monetary authority, the enhancement of Chinese financial stability systemdemands immediate attention. The report of the18th National Congress of CPC clearly impliedthat one of the key tasks from next4years’ development plan of the country is to improvefinancial supervision, promote financial innovation, improve the banking, securities, insuranceand other industries competitiveness and safeguard financial stability. At present, china’s economyis in a critical period of transition, facing severe and complicated international economicenvironment, the research of “financial stability, inflation and economic growth” will provideuseful reference to the balance, coordination and sustainability of China’s economy development.In addition, in current situation, the foundation of China’s “financial stability” theoretical systemjust started, with many areas to be explored, and has not yet formed a sound framework. Thus, thetheoretical and empirical research based on financial stability is a useful supplement to thetheoretical system of financial stability, having important theoretical and practical significance.In this dissertation, we present the main theory of financial stability, build the ChinaFinancial Stability Index (FSI) based on IMF financial soundness indicators and other domesticand foreign studies and analysis it according to actual facts happened in China, and study therelationship between financial stability and price stability, the monetary policy rule integratedwith financial stability factor, the relationship between financial stability and macroeconomicperformance, and the relationship between financial stability and economic growth with differentkinds of econometrics methods. Firstly, in this dissertation, according to the actual situation of china, we build the ChinaFinancial Stability Index, and analyze the status and trend of Chinese financial stability. From theoverall trend, the stability of China’s financial system showed a trend of steady improvement from2004; from volatility point of view, in the period from2005to2006and from2007to the end ofthe interim period during2009, China’s financial stability shows obvious volatility; from thehorizontal value point of view, China’s financial system stable state is divided into the followingthree phase: the first phase, from early2004to mid-2007, China presented the overall financialstability of the better trends; second phase, from early2007to mid-2010, the Chinese financialstability appeared violent fluctuations, appeared trough in mid-2009and peak at the end of2007;third phase, from2010to late2013, China continued steady improvement of financial stability,the volatility is small.Secondly, in this dissertation, based on FSI index built before, we use markov regimeswitching model to analyze the relationship between China’s financial stability and price stability.Research shows that in China, financial stability not only helps price stability, financial stabilitycan also be explained by price stability; price stability and financial stability is commonly inmoderate negative correlation, as in low levels of inflation is prone to financial stability. At thesame time, the impact on prices of financial stability has significantly reduced during time; it notonly helps to reduce the level of inflation values, but also helps in reducing its volatility.Thirdly, in this dissertation, based on the standard linear interest rate rules, we introduced theterm of financial stability gap to the rule to examine whether China’s central bank concerningabout the financial stability factor while implementing monetary policy. Through interest raterules model parameter estimation of the interest rate rule integrated with financial stability factors,we found that the interest rate adjustment parameters to financial stability gap is not significant,suggesting that the main attention of implementation of monetary policy with financial stability inChina’s central bank is not high. This is mainly because the low level of China’s interest ratemarket openness, the transmission mechanism transferred monetary policy signals to financialmarket is not complete, which is main direction for financial system regulation in future. With theaccelerating process of China’s market-oriented interest rates, the use of market-based instrumentsin the financial markets for financial regulation and supervision is the key to future financialmarket stability.