| Whether monetary policy should play a role in controlling asset price volatility has been the subject of intense debate.The consensus among most policymakers before the financial crisis was that central Banks should focus on controlling inflation and stabilizing output gaps,ignoring the dynamic evolution of asset price bubbles,even if the latter posed a potential threat to price and output stability.Monetary authorities have no information advantage in identifying and measuring asset price bubbles.Even if bubbles can be observed,interest rate is too blunt as a tool of monetary policy adjustment.Any major adjustment to curb bubbles may lead to serious collateral damage,and economic downturn is more risky.By the end of the 1990 s,a broad consensus had been reached on monetary policy,including price stability as the main objective of monetary policy and the assurance of credibility and transparency in its objectives and operations.The macroeconomic stability of countries during the Great Moderation period highly affirmed the monetary policy framework of flexible inflation system.In the context of short-term interest rate adjustment,the central bank should regard price stability and financial stability as highly complementary and consistent goals.However,the outbreak of the financial crisis,the bursting of the American real estate bubble made the financial system lose its function,The real economy is in a deep recession,The crisis is a reminder that people are no longer intoxicated by the success of monetary policy in the great moderation,and are revisiting the potential threat of asset price volatility and the need for central Banks to respond in advance to avoid a recurrence.In addition,under the framework of New Keynesian Macroeconomic theory,the optimal monetary policy framework adopts flexible inflation target system.Scholars believe that macroeconomic stability,especially low inflation,can alleviate financial instability.In these models,financial markets are perfect,there is no need for financial intermediation,asset prices are determined by macro fundamentals,and financial variables do not play a role in the transmission mechanism of monetary policy.After the crisis,people began to realize that the existence of financial friction has an important influence on the design of optimal monetary policy.Considering the introduction of financial friction into the New Keynesian Model,the formulation of monetary policy needs to eliminate or minimize the efficiency loss caused by various kinds of friction.With China's financial system deepening,the role of the real estate market and the stock market in the macro-economy has become increasingly prominent.Therefore,in the face of the continuous rise of real estate prices and the dramatic fluctuations of stock prices,whether the central bank of China should make a systematic response to the fluctuations of asset prices has become an important issue.This paper tries to provide theoretical and empirical research on asset price volatility and monetary policy choice in China from the perspective of financial friction.Based on the micro level analysis of how asset prices affect the real economy through the balance sheets of enterprises and Banks,this paper conducts a quantitative study on the degree of financial friction in China's credit market,and discusses the policy effect of monetary policy intervention in asset prices as well as the cost and benefits.First of all,the financial frictions and related theories of monetary policy rules are sorted out,introduces the development of information economics and the basic theory of information asymmetry in credit market.Exogenous the financial economic cycle theory of exogenous credit constraint mechanism,including deducing the credit constraint mechanism model of mortgage credit constraint mechanism and information cost-type friction.The mortgage credit constraint mechanism expresses that the collateral and the interest rate can act as the risk identification mechanism in the credit market at the same time.Information cost friction,on the other hand,is based on the fact that financial intermediaries have to pay a review cost to observe the actual returns of enterprise projects.Both of these two types of financial friction are manifestations of information asymmetry between financial intermediaries and enterprises.Then it discusses the financial economic cycle theory model of endogenous credit constraint mechanism,a balance between the supply of private sector savings and the deposit taking by financial intermediaries.When there is information asymmetry between the financial intermediary and its funding provider,the balance sheet condition of the financial intermediary limits its ability to obtain deposits,and the endogenous credit constraint mechanism expresses the financial friction faced by the financial intermediary in the external financing.Subsequently,the basic framework of monetary policy analysis and the expansion of the New Keynesian monetary policy model are explained,which is the theoretical basis for whether monetary policy should respond to asset price fluctuations.Secondly,based on the theory of credit constraint mechanism,this paper makes an empirical study on financial friction at the micro level of enterprises and banks.Chapter three,based on the external financing premium mechanism and mortgage constraint mechanism,analyzes how asset prices affect corporate liabilities and investment through the balance sheet approach.By constructing the local equilibrium model of borrowers and enterprises and deriving the capital supply curve under the credit constraint,the change of the capital supply curve leads to the deviation of the expected asset price and capital input quantity of two important factors affecting the expected investment of enterprises.Using the financial data of listed companies and stock data as well as the provinces of real estate data for empirical test,the result shows that the enterprise can mortgage house value and enterprise net debt of the enterprise and business investment has significant positive influence,corporate credit dependence degree is higher,the enterprise investment on housing values that can be mortgaged,and the net value of the sensitivity of the stronger,again using PVAR model test between asset prices,corporate debt and corporate investment will form the circulation function and continuity.The fourth chapter is based on the assumption of financial friction in the banking sector.The endogenous mechanism of the impact of asset price on bank credit is derived.Using the micro data of commercial Banks in China,under the condition of financial institutions type heterogeneity,on the relationship between the price and the bank credit assets,the results show that the listed and unlisted Banks credit scale of the sensitivity of the asset prices,real estate prices and stock prices of listed Banks credit impact is more significant.On this basis,the causes of differences are further analyzed.There is no obvious difference in the impact of asset price fluctuations on capital adjustment among different types of Banks,and only the impact of stock price on the capital adjustment of non-listed Banks is not significant.In terms of financial frictions,the deposit size of non-listed Banks is more sensitive to the change of bank capital than listed Banks.The next empirical test of the impact of interest rate shock on asset prices in China is an important prerequisite for effective adjustment of asset prices by monetary policy.Based on the Search Models of Money,the micro basis is incorporated into the dynamic general equilibrium model.Based on the theory of liquidity asset pricing,the general equilibrium of money and asset prices is analyzed,and the assumption of nonlinear relationship between monetary policy and asset prices is obtained.Using the parameter estimation method of Tvp-Var model,the non-linear relationship between interest rate change and asset price is tested,and the public rational expectations are considered on the basis of rational expectations theory.Through the ARIMA model,the interest rate change is divided into two parts: expected and unexpected,and the impact of interest rate change on the real estate price and stock price is analyzed respectively.The results show that the "new normal" period of economic boom,changes in expected and unexpected interest rates on long-term impact of real estate prices are much more strong,but unexpected interest rates to the short-term effects of the stock market is not obvious,that our country economy into the "new normal" period,the interest rate shock becomes the leading factor in the real estate prices and stock price volatility.Further this paper focuses on the optimal behavior of asset price volatility and monetary policy in the presence of financial friction.According to the results of the above empirical study,two kinds of financial frictions are included in the model,including mortgage financing constraints and endogenous bank loan spreads,and the asset price is limited to the real estate price.Under the assumption of steady-state efficiency and second-order approximation of welfare-related variables,welfare maximization is equivalent to the stability of four objectives,including inflation,output gap,consumption gap between households and enterprises,and real estate distribution between them.The promise of optimal monetary policy,buffeted by productivity and the credit crunch,means a short-term trade-off between stability goals.Under the fluctuation of productivity shock,the welfare benefits of pursuing optimal policies are relatively large.The impact of the credit crunch has a direct impact on lending margins and the value of mortgages in real estate,so policies aimed at sustaining business demand for real estate have become less effective.In addition,a simple target rule makes current inflation negatively correlated with expected real estate price changes in both current and period,as a result of productivity shocks and credit shocks.From the perspective of monetary policy,this indicates that if the fluctuations of real estate prices lead to substantial fluctuations of agent spending policies constrained by mortgage financing,then it is necessary for the monetary authorities to include real estate prices in the monetary policy framework.In the last,we further discuss the regulatory effect of macro-prudential regulation on asset price fluctuations.In terms of reducing bank credit risk,the interaction between monetary policy and macro-prudential regulation is mutual.Expectations of a financial market boom led to credit expansion,and increased demand for assets raised prices,creating a spiral of rising asset prices.The bursting of the credit bubble component hits the balance sheets of financial institutions and enterprises,which will threaten the operation of the credit market and the whole financial system.Therefore,monetary authorities need to pay special attention to the composition of asset price credit bubble,and liquidity regulation in macro-prudential supervision can resist the impact of asset price changes on bank balance sheet.The dynamic panel model and the panel threshold model are used to test the impact of asset price and interest rate shocks on bank risk taking and the regulation of bank liquidity regulation on bank risk taking.The empirical results show that the rise of real estate prices will increase the bank's risk taking,while the increase of the net stable capital ratio can weaken the impact of real estate prices on the bank's risk taking.Therefore,the counter-cyclical macro-prudential supervision policy can cooperate with the monetary policy to regulate the asset price. |
PDF Full Text Request