Research On The Relationship Between Stock Price Fluctuation And Inflation In China

Price stability has been one of the macroeconomic indicators which most countries want to achieve. With the rapid development of China’s stock market and stock plays an increasingly important role in the asset allocation of residents, thus the relationship between stock price volatility at this stage and China’s macroeconomic performance have become increasingly obvious, and therefore the impact on inflation is also growing, so study the impact of stock price fluctuations on inflation may lie a solid basis for the effective and timely monetary policy.This paper systematically reviews the domestic and foreign scholars researches about stock prices and inflation relationship, and related theories about stock price fluctuations and the reasons of inflation, on this basis, this paper established a theoretical framework about how stock price affects inflation, mainly study the impact through consumer channels and investment channels, in other words, the stock price volatility, mainly through the wealth effect, liquidity effect and other factors affect consumer spending of residents; and by Tobin Q effect, corporate balance sheet effects, expected effects and other factors affect business investment spending, thereby affecting aggregate demand,and ultimately, result in demand-pull type inflation. Then based on the theoretical framework, we use cointegration test, Granger causality test and VAR models and other methods for studying the positive relationship between the two items. The results find that China’s stock price fluctuations and inflation have cointegration relationship, in other words, there is a long-run equilibrium relationship between them. And the stock price volatility can provide information in predicting inflation indicator, equally to say, the stock price fluctuations can cause changes in the real economy, and then through demand channel affect inflation level. Finally, conclude the results of theoretical and empirical analysis, and according to the economic development of our country at this stage, the paper put forward relevant policy recommendations.