Abstract

The present studies on Financial Conditions Index（FCI）assume that evolution of the weight is static or dynamic，and in fact it is Flexible and Dynamic，so it is not only the weight itself and its evolution should be estimated from data. Considering our country from the “old normal” to the “new normal” structure change is not continuous，from the goal of monetary policy to control inflation，the paper introduces MI-TVP-SV-VAR model，chooses 5 financial Conditions variables：money supply，interest rate，exchange rate，stock price and house price，uses the MCMC method which is based on the Bayesian Statistics to estimate the Flexible and Dynamic weight of the five variables，constructs China’s Flexible and Dynamic financial Conditions index，and analyzes its ability to forecast inflation rate.

The main conclusions of this book：Firstly，China’s Flexible and Dynamic financial Conditions index which constructed in this book is reasonable and effective. It is high cross correlation with inflation，and the highest cross correlation coefficient is 0.842. Secondly，China’s Flexible and Dynamic financial Conditions index which constructed in this book is a good precursor and predictor of inflation. It leads inflation 1-7 months，can well predict future inflation；thirdly，China’s Flexible and Dynamic financial Conditions index which constructed in this book indicated that the weights of China’s Flexible and Dynamic financial Conditions index is not all static and not all dynamic，is flexible and dynamic；fourthly，China’s Flexible and Dynamic financial Conditions index which constructed in this book leads inflation is asymmetric；fifthly，the book research shows that the effect of China’s monetary policy transmission channels were significant differences in the short term，the weight of interest rates and real estate prices influence on the financial Conditions of this period is relatively large.

Innovations in this book：Firstly，concept innovation. This book firstly presents the concept of Flexible and Dynamic financial Conditions index at home and abroad. Secondly，content innovation. This book is constructed the measurement model and calculation method of the first Flexible and Dynamic financial Conditions index by expanding，then firstly construct China’s Flexible and Dynamic financial Conditions index；thirdly，method innovation. This book firstly presents and calculates the three-dimensional Flexible and Dynamic impulse response function at home and abroad and firstly applies MI-TVP-SV-VAR model to construct FCI at home and abroad.

The main value of this book：Firstly，theoretical value. The main theoretical value of this book includes expanding financial Conditions index theory，monetary policy theory and impulse response function theory；secondly，social mechanism. Mainly social value of the research in this book includes：provides a flexible and dynamic monitoring indicators to monitor the financial overall Conditions，China monetary policy tightness Conditions and its effect of implementation of the scientific decision-making，It provides a scientific and decision-making reference for the timely and appropriate fine-tuning and structured monetary policy in China，and provides Flexible and Dynamic tool for expected inflation and forecast management in China.