Analysis Of The Asset Price Transmission Channel Of Monetary Policy In China

Asset price refers to the price of stocks, bonds,real estates,foreign exchange and other assets. Due to stock price and real estate price fluctuate more often, so sometimes asset price refers to stock price and real estate price. In 1990s, the capital market has not well developed, bank is in the center of monetary transmission channels. At this time, central bank adjusted macroeconomics mainly by controlling money that is provided by commercial banks. Along with the development of capital market, asset price became more and more important. Asset price channel has become a very important channel of monetary policy transmission channel. For asset price is highly sensitive on monetary policy, minor changes of monetary policy would cause asset price fluctuate, delay is very short. Meanwhile, asset price and entity economy is highly relative, by tobin's Q effect and wealth effect, asset price fluctuation affect investment and consumption, then the whole economics. So it is important to study the mechanism of the monetary policy transmission channel of asset prices, understand the importance of it and inspect whether the channel is smooth or not.This paper study the condition of today's capital market of china, research the affection of the development of capital market to our monetary policy transmission channel, find obstacles of monetary policy transmission channel of asset prices and then seek the methods to solve the problems. In recent years, China's capital market has developed a lot, the development of capital markets has profound effects on monetary policy transmission channel. Before the development of capital market,there is only one channel of monetary policy transmission channel, that is the credit channel. As the development of capital market, a new channel is brought in, that is the asset price channel.Now the time of two channels has come. This new change in one hand make the transmission mechanism more flexible, but on the other hand,the transmission mechanism is more complex as well.The transmission of monetary policy by asset price can be divided by two phases. First, the changes of monetary policy are transmitted to the capital market and make asset price change. Second, the change of asset price affect the action of investment and consumption, entity economy changed. To make the channel work,we need some prerequisites. First of all, the capital market should be perfect. Second, investor should be rational and third monetary market and capital market should be highly consistent. Only with these prerequisites, monetary policies can be transmitted successfully. Reinspecte to China's capital market situation, the author discovered that our country's monetary policy transmission channel of asset prices has some obstacles. The main reasons are:first, China's capital market structure imbalance. Such imbalances embodied in equity structure, product structure, investor structure and capital market exit mechanism and so on. Secondly, even now, China's monetary policy relies mainly on the banking system, capital market monetary policy transmission mechanism has not be given enough attention. Finally, China's capital market and money market lacks consistency,too much money stays in capital market resulting in asset prices unreasonably tall.In the part of theoretical analysis, this paper studies the effectiveness of asset price channel empirically. And in the part of empirical research, the paper tests the effectiveness of the two transmission stages by granger causality test. The empirical research shows that, interest rates and changes of M1 is asset price changes'granger reason, the first phase is effective. But the second stage is not effective, the change of asset price has little affection on investments and consumption. Through empirical analysis, the author thinks that, at present, China's monetary policy transmission channel of asset prices has many obstacles, we should deepen the development of capital markets, prove the construction of capital market system and integrate the capital market and monetary market. Finally the author thinks, at present, we should not take asset price into the ultimate goal of monetary policy, but we should make highly concern of it.