The Empirical Research Of Price Fluctuation Of China's Asset Market And Monetary Policy

In the monetary policy decision-making, most researcher's conclusions are based on the way of conduction of asset price to real economy in developed countries. Based on these assumptions monetary policy conclusions can not fully meet the emerging needs of monetary policy decision-making in developing countries. For the research of monetary policy intermediary, most of the domestic scholars are more concerned about the influence of the volatility of the stock market on the total volume of money supply but ignore the influence on the structure of monetary policy target intermediary and its stability. This paper will focus on the two aspects mentioned above. First of all, through loosing the assumption of the way of conduction of asset price to the real economy, this paper compares the optimal monetary policy under different circumstances and conducts the empirical test based on the result above in order to obtain the way of conduction of China's asset price to the real economy . Through the empirical method, we further tested the influence of Chinese stock market on the structure of monetary policy target intermediary and analyze these effects of those influences on the stability of monetary policy target intermediary.This paper argues that not only are there the "wealth effect", "investment effect" in the conduction of Chinese asset price to real economy, but also there is"preference effect of monetary assets." The influences brought by the three effects on the real economy are different. Western economists believe the "wealth effect" and the "investment effect" can stimulate economic development, but this paper argues "preference effect of monetary assets" is another story. As the "wealth effect", "investment effect" and "preference effect of monetary assets" have the different influence on real economy; it is difficult to know whether the conduction of asset price to real economy is positive or negative. In developing country, capital market boom may even have negative conduction effect on the economy. The reason is that the "preference effect of monetary assets" dominates in immature capital markets. Therefore, compared to the country with the positive conduction of asset price to the economy, the country with the negative conduction should adopt more accommodative monetary policy when facing capital market boom in order to offset loss funds which is supposed to flow to the real economy and meanwhile should increase the response to inflation and output deviations. For the influence of capital asset price on the intermediate target of monetary policy, China's stock market not only affects the total volume of money supply but also reflects its internal structure. The fluctuation of intermediate target of monetary policy structure caused by stock market volatility has already begun to have an impact on the stability of the intermediate target of monetary policy. Although the empirical results show that the overall impact of the stock market on the intermediate target of monetary policy is not significant, but with the further growth of the capital market, the impact will become more and more significant. Central bank is confronted with the challenges of intermediate target of monetary policy controllability and predictability.Therefore, China's central bank should consider the conduction of the capital asset price to real economy when setting monetary policy. With the maturity of our investors and capital market, "wealth effect" and the "investment effect" in China will also gradually emerging, If these two effects dominate in capital market, the central bank would adjust monetary policy in time, otherwise it will be difficult to achieve the target of economic growth and price stability. Meanwhile, money supply volume as the intermediate target of monetary policy is subject challenge due to the influence of capital asset price on money supply structure and the money supply multiplier. Therefore, in one hand the central bank should pay more attention to law of fluctuation of intermediate target of monetary policy structure and money supply multiplier so as to make the monetary policy more controllable effective and in the other hand should actively seek a more stable intermediate target of monetary policy in the hope of good implementation of monetary policy on the basis of the right monetary policy decision-making.