THE RELATIONSHIP OF INFLATION RATE ON FINANCIAL STABILITY IN CHINA’S

Abstract

During the pandemic Covid-19, there are various impacts on the economy, especially on financial stability. To control the situation and the spread of the virus, world governments undertook prompt measures like lockdowns, travel restrictions, and quarantine. These policies, however, had a significant impact on world economies in terms of economic growth and energy use. When the economy is stable financially, the system can withstand shocks mostly through self-correcting mechanisms, preventing adverse effects from undermining the real economy. Due to the fact that financial systems are used for many transactions in the actual economy, it is essential for economic progress. This study investigates the connection between bank assets and China's inflation rate. This study using the data start from 1986 to 2020. The study used an advanced analytical model known as the auto-regressive distributed lag bound testing technique to achieve this. According to empirical research, inflation has a negative long- and short-term impact on the development of the financial industry. In other words, the performance of the financial sector is positively and statistically significantly impacted by economic expansion over the long and short terms. Furthermore, the findings demonstrated that prior financial sector changes had a favourable impact on the financial industry's performance in the intervening time..