A Study on the Correlation between Asset Price and Inflation in China Based on VAR Model

摘要

This paper studies the correlation between stock prices, real estate prices and inflation in China based on VAR model using monthly data between 1998 and 2010.Our findings are as follows. There is a long-term equilibrium relationship between stock prices, real estate prices and inflation. Specifically, previous inflation, stock prices and real estate prices have significant effect on current inflation, and the first factor has the biggest influence on current inflation.We conclude that asset price volatility will endanger price stability and financial stability; the central bank should pay close attention to asset price swings.