The Study On The Relationship Between Credit And Prices

The scale of China's bank credit has been keeping a great growth in recent years,especially that of a rapid growth by 2009.Meanwhile China faces wide prices fluctuate.Since the second half of 2009 the economic subject has maintained the inflationary expectation.And for many years our asset prices remain fluctuating.It seems that high real estate prices and fluctuate stock price are hard problems in our development.Fluctuations in commodity prices are of growing concerned.In modern finical system bank credit is a major source of economic development.And it is also an important channel for monetary policy in China. Commodity prices are closely related to our economy and people's life. Keeping prices stable is our objective of monetary and macro-economic control.On real economy bank credit play a role as a bridge for intermediary. Is there any relationship between bank credit and price level?And what is their mechanism? The article studys the correlation between credit and prices mainly on macro-field,for showing the importance of credit on the scale and structure.From that we can see the problems of credit and economy in operation.It is helpful for government to adjust monetary policy and macro control policy by providing references.At first the article introduce the monetary and credit theory.Second, we describe the present situation of credit in operation with economy, domestic demand and prices.And the paper analyzes the mechanism of credit and prices in China.The article outlines the changing of credit and asset prices.Then the article builds comprehensive weighted price index to reflect the overall price level by weighting asset prices.Third, the paper uses the datas from the first quarter of 2001 to the second quarter of 2010 to analyze the correlation between credit and prices in China.Through cointegration test and Impulse Response under VAR model, further analysis of VEC model and Granger Causality, the paper concludes that there is a positive bidirectional correlation between credit and prices in long term.Bank credit enhance domestic demands through facilitating investment and cousumption to rising prices.While there is a negative relationship between interest rate and prices. The impulse response of credit on economic growth is negative.It shows that our credit is not reasonable and is not suitable for ecomony. Finally, the paper suggests we should adjust the scale and the structure of our credit to improve credit's utilization efficiency of utilization, that is good for healthy economic growth.