Research On The Assets Price And The Inflation Rate

In the past several decades,the volatility of asset price has been seriously huge in the main capital countries of the world,and the price increase significantly even in the low inflation.As for the cases in China,this contradition between asset price and price level has happened in the same way.Then,two questions should be put forward:are there any intrinsic logistic relationship between the increasing of asset price and the general price level? And what is the relationship between asset price and inflation in China?This paper focuses on the relationship between volatility of asset price and inflation,because this research is valuable both theoretically and actually,with the development of our capital market,increasing of resident real estate and equity.And the discussion on the predictive and directive effects of capital market volatility to the development of market economy,indubitably encourages the academic research on the relationship between financial economy and real economy;provide theory and direction for the monetary authorities to design and excute effective macroeconomic monetary policies.The innovation of this paper is using financial conditional index(FCI) to analyse the relationship between asset price and inflation.In this paper,FCI in China is established with the VAR model with the help of foreign FCI research and the monetary policies in China,furthmore,the empirical research of the relationship between FCI and CPI indicates FCI is a predictive leading indicator and could be a good indicator of monetary policy.The conclusion of this paper:asset price is significantly related to the inflation in China,and the effect of the real estates price to the inflation is more significant,perpetual and stable than equity price.Because our securities markets are imperfect,stock price is volatile,and the link with the future inflation will be limited.So the introduction of asset price could improve the predictive ability of future inflation,but how to use asset price to measure inflation is still difficult;As for the importance of the asset price relative to inflation,monetary policies should focus on the relative asset price,especially equity price;At last,we discuss how to improve the Consumer Price Index(CPI) of China under the significant influence of real estate price.