Research On The Influence Of Financial Development On Price Fluctuation

The level of financial development plays an important role in the price fluctuation in our country.Therefore,it is very important to reveal the mechanism of the current financial development on price volatility.We use the data of financial development of various provinces in China from 2006 to 2015 to analyze the price fluctuations that affect the financial development.Domestic and foreign scholars on financial development related to the price fluctuation of the existing research is still the main focus of the financial development impact on inflation.However,the research on the relationship between financial development and price volatility is often neglected.From the perspective of financial development,we study the impact of financial development on price volatility in various provinces in our country.First of all,the paper defines the concept of financial development and price volatility,and sorts out the relevant literature on financial development and price volatility.Secondly,it further elaborates the mechanism that financial development has a restraining effect on price volatility.Thirdly,based on the data that has been processed,we calculate the financial development index of each province in China and analyze the difference of each province's financial development index.There are significant differences in the financial development indices of different provinces,of which the financial development index of the eastern coastal provinces is high.In order to examine the impact of financial development on price fluctuations through economic fundamentals,the improvement of investment environment and the development of financial industry,this paper analyzes the impact of price volatility on the basis of the results of the financial development index and the three sub-indices separately The value is regressed.The regression results show that the financial development has adjusted and eased the price volatility through three aspects: the economic fundamentals,the investment environment improvement and the financial industry development.Further dividing the sample into four regions,eastern,central,western and northeastern China,finds that the degree of financial development in the less developed regions is significantly higher than that of the developed regions in regulating and mitigating price volatility.Finally,combining the theoretical and empirical analysis,the policy recom-mendations put forward are as follows: It is necessary to continue the reform of the economic system and enhance the market's ability to allocate resources;to promote market participants to form a rational incentive mechanism and decision-making mechanism to achieve mutual restraint and win-win economic entities We should make great efforts to improve the regulatory function of financial markets and stabilize the price volatility of financial assets so as to raise the level of financial development in all provinces in our country through policies and suggestions as mentioned above so as to ease and adjust the price volatility in our country.