Study On The Influence To Assets Price From China's Excess Liquidity

In recent years, excess liquidity has become a phenomenon in China's economic operation. Continued excess liquidity has affected the health and stability of our country's macroeconomic growth. At the same time it also affects the effectiveness of monetary policy. This dissertation focuses on the influence to physical assets and financial assets from China's excess liquidity and makes solutions to excess liquidity.Excess liquidity means to the banking system liquidity surplus. Although not including the stock market and the real economy, the excess liquidity will lead to the increase of consumer prices, physical assets and financial assets price. The major reasons of excess liquidity in China includes global monetary excess, continuing the "double surplus", China's low consumption rate and the increase of capital adequacy ratio in commercial banks.From the theory of currency quantity, the excess liquidity will lead extra money chasing fewer assets, thereby causing the overall rise of price. This includes not only stock prices of financial assets, but also physical assets rise in real estate prices.It can be explained from the basic economic theory that the excess liquidity of money market impact mechanism influences the assets price. Currency quantity theory of cash transaction, currency quantity theory of cash balance, Keynes's currency demand theory, Friedman's new currency quantity theory and rational expectations school of monetary theory can set out the impact mechanism individually. Excess liquidity could affect assets price form interest rate, inflation, wealth effect and balance sheet effect.In Empirical Study, through the transformations and amendments of Cambridge formula, we got the basic structural model. Then we identified non-structural model, VAR. Through the change of Shibuya's dynamic equilibrium price index, we can conclude composite price index including stock prices and real estate prices. Empirical result of this dissertation also supports previous theoretical derivation.For the solution to excess liquidity in China, the dissertation pointed out that the existing central bank's monetary policy failed to solve the liquidity problem. The author stressed that at this stage the main solution to excess liquidity is to create sufficient assets, and to freeze excessive money. Based on the natural absorbing liquidity attribute of real estate market and the stock market, the author pointed out that we should resolve the problem of excess liquidity by developing the real estate market vigorously and expanding the stock market.