Asset Prices, Inflation And Inflation Expectations’Relationship And The Implication For Monetary Policy In China

After the outbreak of the financial crisis in2008, governments have launched quantitative liberal economic policies, to inject liquidity to save the market. In the past one or two years, our country economy walks out of the haze of the financial crisis, and has been rapid developed with rapid. At the same time, the inflation problem has gradually become the focus of the market. From the beginning of the end of09to11years in the third quarter, the consumer price index (CPI year-on-year data) has been rising. Then the property market bubble is coming. The house price of big city has been in high. Small and medium-sized city’s housing prices are also rising. Both the general consumer goods and asset’s prices caused serious economic burden to residents and it becomes the major issues concerning people’s livelihood, and it also brings great risk to our socialist economic construction. Inflation is a phase problem to the regulation of macro economy, but it is a long-term task to the problem of inflation itself. Most of time we are in the period of inflation in the history, and it proves the importance of the issue. I will make the inflation expectations management ways more perfect in the channel of the volatility of asset prices. Asset prices are high in the inflation. Research into the formation of the bubble, and measure the bubble and then explore the new way to regulate inflation. Asset price movement on one hand reflects economic hot and cold, on the other hand, it affects the future economic exception of people. The exception is the inflation exception, and it affects the level of regulation. So strengthen the management of inflation expectations have a very active role in the process of controlling inflation. As asset prices will affect the inflation expectations, then monetary policy whether the government can act on asset price inflation expectations and reach the effect is also discussed in this paper is needed. The study of problem not only in theory, but also relates to practice. How to put the public expected perceptual results to quantify and how to auxiliary monetary policy with the news media are both discussed in this paper. Inflation expectations management problem research abroad earlier in the domestic and it has made many effective results abroad. These experiences are worth to draw lessons from, but also with the actual situation in China. China’s capital market has occupied an important position in the economy or not and we can predict the economic rationally or not. This paper will give you own opinion. To solve the problem of the first step is to know how to recognize and measure the asset price bubble. Which form does an asset price bubble appear? To determine whether the bubble is based on the asset price changes for a long time performance, and the associated economic indicators to be aide measurement. Then we should clarify the relationship among asset price, inflation and inflation expectation. The first is to known the expectations of inflation, and the influence factors and the relationship between itself and the inflation. Secondly, the use of VAR model and impulse response tool to estimate our financial condition index FCI, and inspect asset price information function, and explain that asset price inflation and expected to have a good predictive index function. Monetary policy can influence the fluctuation of asset price inflation is expected to indirect management and governance of inflation. Along this train of thought, we need to solve many Problems. What is the relationship between the monetary policy and asset price? Whether the monetary policy can act directly on the fluctuation of asset prices? If it can, what should monetary policy to be done when the asset price fluctuations. Ultimately these problems foothold in need from the angle of practice, that is how to consider the public based on asset price made inflation expected on the basis of guiding the expectation of the public. Monetary policy authorities cannot only simply use of monetary policy tools to control inflation, but also should draw lessons from foreign advanced experience. Quantitative investigations and analysis to the expectations of the public. Universal public economic common sense and to be the guide of people’s expectations of inflation. We will do expected monetary policy management from many ways.