Research On Nonlinear Relation Between Financial Stability And Price Stability

Price stability,as one of the four core objectives of macroeconomic policy regulation and control by monetary authorities such as the Central Bank,plays an important role in maintaining financial stability,promoting economic growth and maintaining the stability of people's living standards.However,with the outbreak of the subprime mortgage crisis in the United States and the international financial crisis in 2007,the central banks of various countries and other monetary authorities realized that the purpose of financial stability and sustained economic growth could not be fully realized by controlling price stability alone.Therefore,it is not comprehensive to treat price stability only as the goal of macroeconomic policy regulation.Therefore,the international community and monetary authorities,such as central banks,attach importance to and speed up financial stability.Financial stability has gradually become the core goal of macro-prudential policy regulation by central banks.Financial stability and price stability have also become the core objectives of the people's Bank of China macroeconomic policy and macro-prudential policy,so what is the relationship between financial stability and price stability in China?Can the two goals be achieved at the same time or in conflict with each other?If we can know the internal relationship between financial stability and price stability in China,it will inevitably increase the effectiveness and coordination of macroeconomic policy and macro-prudential policy control.Therefore,the research on the relationship between financial stability and price stability in China has important value and significance for the development and improvement of China's financial theoretical system,and is of great value and significance for the macroeconomic policy and macro-prudential policy of our country.It will be beneficial to the healthy and stable development of our economy.Therefore,this paper will carry on the thorough research to our country financial stability and the price stability intrinsic correlation,clear our country financial stability and the price stability theory foundation,determines our country financial stability and the price stability theory relations.Explore the theoretical mechanism of the interaction between financial stability and price stability.On the other hand,an empirical study on the intrinsic relationship between financial stability and price stability is carried out to verify the correctness and practicality of the theoretical mechanism of financial stability and price stability in China,and to understand the real intrinsic dynamic correlation between financial stability and price stability in China.Provide a path for the monetary authorities such as the People's Bank of China to rationally set financial stability and price stability targets and tolerable intervals.The research content of this paper is divided into six chapters and three parts,the specific contents are as follows:The first part is the theoretical logic analysis of financial stability and price stability,which mainly includes the literature review part of Chapter 2 and the logic analysis of financial stability and price stability theory in Chapter 3.This part of the research first combs and summarizes the financial stability and price stability research results and current situation,and then redefines the concept of financial stability,combing the financial stability theory system,clear financial stability index theory,etc.Then it analyzes the influence factors of financial stability and price stability,and finally analyzes the theoretical logic of financial stability and price stability,and deduces the two-zone Markov transfer model.The second part is the construction of China's financial stability index,which mainly is chapter 4.This chapter constructs the financial stability index by using the dynamic factor analysis method:firstly,it selects and analyzes the four index system and 25 basic indexes,then carries on the empirical analysis to the 25 basic index,determines the public factor and its weight.The comprehensive financial stability index of China is calculated,and the HP filter and "critical value" method are used to calculate the financial stability of China.The third part is the empirical study of financial stability index and price index,which mainly is chapter 5.In this chapter,the relationship between financial stability and price stability is studied by using the two-zone Markov transfer model,and the nonlinear dynamic correlation between the financial stability index and the price stability index in China is clarified.Specifically,the descriptive analysis and stability test of the financial stability index and the price stability index are first carried out;secondly,the Granger causality between the financial stability index and the price stability index is verified.Then the nonlinear dynamic correlation between the financial stability index and the price stability index is estimated and analyzed.Finally,the nonlinear dynamic correlation between price stability index and financial stability index is estimated and analyzed.The main conclusions are as follows:First,since October 2003,China's financial sector has mainly experienced four periods of financial instability,namely 2007-2008,2010-2011,2013 and 2017-2018.The financial situation in China may continue to approach the unstable border.There are signs of financial instability,our government authorities should pay attention to the change trend of China's financial stability index,and take measures to prevent the occurrence of financial instability in advance.Secondly,from the two-zone Markov transfer model of financial stability index and price stability index,we can see that financial stability index and price stability index have significant regional correlation.The negative correlation between the two regions indicates that the trend of price stability and financial stability is the same.In addition,in different periods of economic and financial fluctuations,price stability has different explanatory power to financial stability.Under the "high volatility"system,the impact of the price stability index on the financial stability index is greater than the"low volatility".Thirdly,from the two-zone Markov transfer model of price stability index and financial stability index,we can see that price stability index and financial stability index also have significant regional correlation.There is a significant negative correlation between the two regions,which indicates that the financial stability of our country is conducive to the decrease of price level and the stability of price fluctuation.The difference between the two regional system parameters indicates different inflation volatility periods.The influence of financial stability on price stability is different,the "high volatility" regional financial stability index has a higher impact on the price stability index than the "low volatility" regional system.