The Construction And Characteristic Analysis Of FCI Based On Monetary Policy

As an indicator of monetary policy, Financial Condition Index (FCI) can effectively measure the financial situation, reasonably assess the degree of the tightness monetary policy, better forecast the level of the inflation and the economic growth in China, which plays vital role in China's economic development. But our research on FCI started relatively late, and most perspective focused on the FCI's construction method. The research on FCI's characteristics was even fewer.Firstly, the text systematically reviewed the FCI-related research, summarized the significance of the research, and constructed the framework Figure. Secondly, it cleared the mechanism of action between the FCI and monetary policy, and used VAR impulse response function weighting method to build our FCI, which was made of interest rates, exchange rates, real estate prices, stock prices and money supply variables. Then it used time series spectral analysis to explore the characteristics of FCI, and discussed the economic cycle of FCI, analyzed the sensitivity between the FCI and the implementation of monetary policy, and found the phased law and basic operating trends in the evolution. The results showed that:on one hand, FCI has a certain periodicity, usually 35 months, which is China's economic development. On the other hand, FCI was the leading indicator for CPI and GDP growth, and the leading role was the most obvious manifestation in the first 3-4 months, which could be used as a leading indicator of macroeconomic. At the same time, it studied the structural characteristics of FCI with the Gray Correlation, and explored the correlation degrees between the constituents of FCI and the implementation of monetary policy, and found the sensitivity of the variables in the evolution of the index. The results showed that the stock prices and real estate prices had a greater impact on China's macroeconomic, which were located in the first two grades; while the impact of the money supplies, interest rates and exchange rates on the monetary policy was relatively small. Finally, according to the time characteristics and the structural characteristics of the FCI, combined with the China's actual financial conditions and economic environment, the policy recommendations were put forward.