Choice Of Monetary Policy In Asset Price Volatility

The twentieth century was the era of rapid economic growth, but also the economic crisis-prone times. Coming into the twenty-first century, a sweeping U.S. subprime mortgage crisis around the world arise awareness of crisis. The economy will not be self-realized. To stabilize monetary system and to remain economic development is inevitable challenges of the national monetary authorities and academics .China's economy and capital market has experienced a long period of rapid development, the whole economic structure has undergone a qualitative change. Financial system developed and the increasingly large financial innovation came one after another, all kinds of financial assets become the primary means of allocation of wealth, influence of financial assets on the economy is increasing. However, as a speculative asset, financial asset prices are still frequent changed, the band is also much larger than the fluctuations in the real economy. Changes in financial asset prices affect the financial stability and economic development.Through comparative analysis of the history, this writer assumed asset prices as Granger causes changes of the consumer price index that asset price volatility argue well movements of consumer price in the future. In order to stabilize development of economy, the monetary authorities need to focus on asset price movements and was to regulate the monetary policy, in order for better development of an economic entity.Compared with traditional consumer price index, by adding asset price factors, the broad price index could be better and more timely response to changes in economy as a whole, China's monetary authorities should gradually establish a broad price index, and which is used to guide the implementation of China's monetary policy.China's current economic situation is grim, due to pre-loose monetary policy, the prices of stock, real estate and various assets rise again and again, the overall economy is in a precarious state, the monetary authorities must be aware of the economic structure changes. To avoid future shocks, breaking the traditional fetter of consumer price index, the monetary authorities must take timely tightening monetary policy to stabilize the financial system and economy where there is bubble.