A Study On The Impact Of Inflation On Selecting Wealth Forms Held By Households

In macro economic research, people tend to only focus on the relationship between macroeconomic variables and ignore the the micro-body's impact on macroeconomic, and thus makes macro research lack of the micro-foundation. Family, as the major micro-economic entities, play a very important impact on economic behavior (wealth held) of each country's economic, political, cultural. Therefore, the family unit can be used as a micro-based research object. In macroeconomic variables, inflation has been one of the key variables in the field of macroeconomic research. The study of relationship between inflation and wealth form held by household becomes to be an important link of macro research's finding micro-based.Since the1978's reform and opening up, China's economy has being keeping a rapid growth, and its performance is directly household income's increasing, living standards's rising, household wealth's accumulating. With the financial deepening accompanying economic development, wealth forms held by household is showing a diversified trend. However, the ever-changing international economic situation and the constant adjustment of the domestic macroeconomic policies makes the appreciation value of household wealth in great uncertainty.Unlike previous research of the impact on inflation of household portfolio, this paper will be the opposite-mainly study on the impact of inflation on selecting wealth forms held by household. Based on inflation's changing and diversified trend of China's wealth forms held, the paper reveals selecting wealth forms held by household not only are affected by individual characteristics (such as age, education, and other factors), but also is to hedge inflation risk and to enhance the appreciation value of the family property. In order to facilitate the study, first of all, household wealth by liquidity level is divided into three categories:strong liquid assets (cash, bank savings, etc.), semi-strong liquid assets (stocks, bonds, etc.), weak liquid assets (real estate, precious metals, etc.). Based on this, principle and internal mechanisms of how the different types of asset price changes are affected by of inflation is investigated. According to the hypothesis of rational man, due to the existence of market transaction costs, selecting wealth forms held by household will grasp the extent of personal information or knowledge level.The relationship between inflation and the three categories of assets is analyzed by number or empirical research of the impact of inflation on the various types of asset price fluctuations. By the study of Chinese data, we found that sustained inflation is affecting the various types of asset price. When inflation is rising, strong liquidity asset's wealth effect will decrease; while the relationship between the volatility of inflation and stock prices or real estate prices is not significant, their yields fluctuation are more affected by economic policies. When various types of asset price are changing in different directions, to increase the value of household wealth is bound to change the household portfolio.Through the analysis of inflation and household wealth data, the article find, during the past30years, the structure of household wealth in China has undergone great changes. The proportion of cash and deposits in total household wealth is declining, and one of the stock assets or real estate of total household wealth is increasing steadily in recent years. And the paper proves that wealth forms held by household is not only limited by the individual characteristics, but also limited by inflation fluctuations, in particular to hedge inflation risk.Finally, the paper concludes the relationship between inflation and wealth forms held by household, and put forward some policy recommendations about how to hedge against inflation risk more effectively.