The Empirical Analysis Of The Impact On Asset Prices By Excess Liquidity

In the 21st century, with the continuing rapid development of national economy and the continued large international trade surplus,Furthermore, with the increasing appreciation of RMB exchange rate, excess liquidity has become a normal phenomenon in China's economic operation.on the other time,in recent years,Our asset prices experienced an unprecedented duration,although is not long but it is a huge increase, there has been more serious asset price bubble. Therefore, people can not help to bring up the following questions:is there any relationship between Our asset price bubbles and excess liquidity? If so, how is excess liquidity affect asset prices? This paper attempts to find out the relationship between them by empirical research.In this paper,we use excess supply of the money to study on excess liquidity of asset prices in China. Usually, in a balanced macroeconomic, the major capital flows to goods market, stock market, real estate market and the bond market. Since the development of China's bond market is relatively slow and small, in this article, asset prices are mainly refers to stock prices and real estate prices. Therefore, this paper focuses on the analysis of excess liquidity on the stock market and real estate market.This paper uses theory and empirical research methods, On the basis of theoretical analysis of the excess liqudity on asset pirces, we choose the quarterly datas of variables,such as board money supply, the Shanghai composite index, real estate price index and the GDP growth rate,from the first quarter of 1998 to the fourth quarter of 2009,and use VAR model for empieical research, draw the following conclusions:First, cointegration test results show that there are cointegration relationship between the excess liquidity in China with stock prices and real estate prices; Second, the Granger causality test results show that the excess liquidity is not Granger cause stock prices risen,but it is Granger cause real estate prices risen, while real estate prices rose in a certain extent it will also contribute to excess liquidity;Third,through the impulse response function and variance decomposition analysis obtained,there is very small explanatory power for excess liquidity does on the stock prices volatility, but it can well explain the fluctuations in real estate prices in China, that is the excess liquidity contribution for rate of stock prices increase is very small, for rate of real estate prices increase is very large in China.At the end of this paper,refer to the causes of excess liquidity analysis and empirical findings,there are some suggestions to solve of the excess liquidity and to prevent asset prices bubbles in China,such as the balance of international payments,improve foreign exchange management system, adjust the income structure, the development of capital markets and the coordination of monetary and fiscal policies.