Research On The Relationship Of Assets Of Assets Price And The Inflation Rate Of China

In the past several decades, the stability of price is the ultimate goal in most capital countries of the world. But in these countries the volatility of asset price has been seriously huge. In August 2007, the subprime mortgage crisis sweep all the major financial markets of the world, including America, Japan and Europe financial markets, and followed by global inflation. And then, by the worsening of the effect of subprime mortgage crisis, the credit crisis evolved into global financial crisis, following by the slash of financial asset price and world wide low inflation.In allusion to this phenomenon, many scholars, homely and aboard, studies on the causes of the present financial crisis and just a very important aspect triggered us into a brown study on it: what is the real logical relationship and dynamic connection between the financial asset prices and inflation in china?This paper firstly provides a review of worldwide scholars'study work relating to the connection of the financial prices and inflation. It is a pity that, until now the total academic relating to this study field, it is still uncertain of whether the stable relationship of the financial prices and inflation remain in the long term or not. This is why I choose this subject as my study field. Through building the Financial Condition Index(FCI), this paper research on the relationship between the financial prices and inflation in china. We hope to educe some valuable conclusions, and still we try to provide some valuable marketing information for the central banks and the far-ranging participants.This paper resort to the method of the academic and empirical analysis. In theory, this paper research on the transiting mechanism of financial prices, using of the Tobin'Q effect, wealth effect and financial accelerator effect. Beside this, this paper study on the effect of inflation on the financial asset price. About the empirical analysis, this paper chose the financial econometrics methods, such as Unit Root Tests, Vector Autoregressive Model and Granger Causality Test and so on, to study on the internal relationship between the financial asset price and inflation.The empirical analysis shows that the real estate price index rate the most in the FCI, that is the effect of the real estates price on the inflation is more signification. Moreover, the FCI could improve the predictive ability of future inflation, and the predictable time is about four and five quarters. This will be a more feasible reference indicator for the monetary policy in china.