Asset Prices And Inflation Correlation

Historically, The stability of price is the ultimate goal of a central bank or monetary authority, because price stability can improve economic efficiency, promote sound economic development, and improving the welfare of the residents and so on. However, when price stability in a country, there will be volatility in asset markets, and asset bubbles will seriously affect the stability of the financial system's health and socio-economic development. Serious inflation will not only undermine the stability of socio-economic development, but will affect social stability. In this background, people need to strengthen the concerns and research that the relationship of the assets price volatility and inflation, particularly since the 90s of last century, along with the stock market and real estate market of China's rapid development, Residents in the stock and real estate assets ratio improved. Accompanied by rising asset prices, China's price level has continued to rise, inflation is expected to increase. Therefore, The study that the relationship between the asset price fluctuations and inflation will have a significant theoretical and practical significance. And it can provide the theoretical basis and guidance of direction for the monetary authorities to development and implementation of effective macro-control policy monetary.The paper through comparative analysis the results of research of domestic and foreign asset prices and inflation, Trying to study through theoretical analysis and empirical combination, using statistical methods measuring the interaction between the asset prices and the inflation, To analyse the relationship of the long-run equilibrium and short-term fluctuations of asset prices and inflation.The conclusion of this paper is:asset price to inflation in China has significant influence, In which real estate prices compare to the stock price have greater impact on the inflation rate, So the introduction of asset price can improve the ability to predict the future inflation,but how to use asset price to measure the inflation is still difficult, In view of the importance of asset price relative to inflation, monetary policy should pay close attention to asset prices, particularly fluctuations in real estate prices.Finally, According to China's actual conditions, combined with the conclusions of theoretical analysis and empirical analysis, given related policy suggestions to prevent assets foam and inflation.