The Empirical Study Of The Relation Between Stock Price And Goods Price In Real Business Cycle

Stock price and goods price are two very important macroeconomic phenomena. Stock return-inflation relations are the key economic indicators of the stability of overall macroeconomic of a country. From the establishment of the stock market, the national economy and the stock market have been got the rapid development, and stock market play a more and more important role in development of enterprise residents and the national economy. Although the development of stock market is still in the well-developed stage, but the strategic position has been identified in our economic development. The paper base on the background of our real business cycle, and do some research about the relation between stock price and goods price. The paper tries to study the relationship between stock price and goods price by using several methods of econometrics, and then provides important related information for investors and policy-makers.The structure of the paper is arranged as follows: in the first part of the paper, we introduce the theories on the relationship between the rate of stock price and goods price, which is the theoretical foundation of the paper. In the second part of the paper, we introduce the models and approaches which we can use to measure and test the relationship between the two variables. In the third part of the paper, we test the relationship between the stock price and goods price in real business cycle in our country by using the models and methods mentioned above. In the end, we draw the conclusion and give our economic suggestions. In the chapter 1 of the paper, we systematically introduced the theoretical studies on the relationship between stock price and goods price in real business cycle by the economists from western countries. We give our introduction from three different points of views, that is, Fisher Effect Theory, Fama proxy hypothesis and General equilibrium model. Given the Fisher Effect Theory, in the early consensus, economists believe that the stock as a hedging instruments that against inflation's loss. so stock price has a positive effect on inflation. Fama Proxy Hypothesis suggests that the negative relationship between stock price and inflation can be divided into following relations. (1)In according to the expected revenue model, stock price has a positive effect on entity economy; (2) Entity economy has a negative effect on inflation. Given the above two points, we know that stock price has a false negative effect on inflation. And General equilibrium model is not satisfied with the above hypothesis. And then there is also a brief introduction about other scholars'hypothesis.In the chapter 2 of the paper, we introduced some important time series analysis models and methods by which we can measure and test the relationship between stock price and goods price in real business cycle. In the first section of the chapter, we introduced the testing methods by which to different stationary series and unit root test, i.e. ADF testing method and LS unit root test. After we got the stationary time series, we introduced Impulse response function and Variance decomposition. And according to the availability of data, then I introduced the source of the data and the choice of the indicator. We selected the data from 1992 to 2007, a total of 189 effective samples, and selected SP, CPI, IP and GM2 as the four indicators of the model.In the chapter 3, we test the relationship between the stock price and goods price in our real business cycle by using the models and methods introduced in chapter 2. This chapter is the most important part of the paper. We selected the data from 1992 to 2007 as a total sample, since we want to test the relationship in real business cycle, we should test the data in a different stage. Taking into account the availability of the data and the needs of the research, this paper will take 1999 as a turning point in total sample. We use VAR model to test the relationship between stock price and goods price, and then we use impulse response and variance decomposition method to test the relationship under the impact of nominal and the real economy. Finally, we draw the conclusion that under the nominal economy effect, the relationship between stock price and goods price showed positive, so according with Fisher effect. Under the real economic impact, the relationship showed negative, but the inherent mechanism acted inconsistent with proxy hypothesis. That is, stock price has a negative effect on real economy, and real economy has a positive effect on inflation. Whatever the period of economic recession or depression and recovery or prosperity, under the real economy impact, the relationship showed negative, but under the nominal economy impact, the relationship in the period of recession or depression showed positive, but showed negative in the period of recovery or prosperity.In the last chapter of the paper, we give the result of our studies and the explanation of the relationship between them. At last, we give some economic suggestions and provide some policy advises.