The Research On Monetary Policy About Asset Price Fluctuation On The Perspective Of Financial Stability

This paper is going to find the tactics about how to deal with the fluctuation of assets prices on the perspective of financial stability.Due to rational and irrational factors, assets prices maybe pass the fundamental values. Because of highly-debted character , financial system is vulnerable instinctually. In the past 20 years, it has been an important stylized fact that the great fluctuation of asset prices is accompanied by the financial crisis. It means that assets prices might lead to banking crises. Keeping the financial stable is a task of the central bank, and he must research deeply the information conveyed by the asset price fluctuation and restrain it when the price is threatening the financial system.According to history and theory, credit-expansion will lead to assets prices rising. With assets prices going down, banking crisis will likely be on the corner. The fluctuation of assets prices are closely linked with banking panic and financial crisis. As a result, the central bank should take measures to control the prices fluctuation, and avoid the adverse effect of the boom-bust of the bubbles.In China, stock price has little relation to credit, which means that stock price fluctuation would not threaten financial security. So the central bank should not take monetary measures to curb this fluctuation. On the contrary, bank credit help house price climb highly, which means great financial risk. So our monetary authorities should take measures to choke the house price which is flying up fast.