Whether The Monetary Policy Should React On The Real Estate Price

Since 1990s of the 20th century, the asset prices fluctuations have been significantly increased. It obviously impacted the financial stability and economical operation.Such as, in the 1980s and 1990s,the Japanese financial crisis;the Asian financial crisis in 1998, and in 2007, the subprime mortgage crisis caused by American real estate prices bubble. In contrast with the asset prices fluctuation, the inflation rates in most countries were all basically under control.Thus, such a problem can be raised:is it desirable that the central banks which lay down the monetary policy to regulate macro -economy should focus only on the price of general merchandise? Whether the monetary policy should be pegged to the asset price? Scholars and monetary policy makers focus on this issue gradually.Judging from the current domestic situation,real estate investment become one of the important ways for the resident. The investment in the form of real estate rised constantly. In addition, as the current real estate prices in some cities growing rapidly,the government continually issued several policies to regulate the real estate market. Under the background of frequent macro-control, this research has its valuable significance.This paper chooses the real estate prices to stand for the asset prices, the deposit reserve rate policy and interest rate to stand for the monetary policy tool.We qualitatively analysis asset prices and monetary policy tools, consumer price (CPI) and monetary policy tools based on the data from 2006 to 2011. It turn out that China's monetary policy maker have been using the consumer price as the basis, while only paying attentinon on monetary asset prices.Then, by constructing VAR model,it was concluded that monetary policy tools (monetary supply, bank credit) have no significant effect on asset prices.This conclusion almost denied the possibility that central bank directly regulated asset prices by monetary policy. Finally, we affirmed the high correlation between asset prices and inflation through empirical analysis. On the basis of the above analyses, the author holds that the central bank regulates asset prices through monetary policy in vain.Because asset prices and inflation exist long-term and short-term equilibrium relationship, monetary policy is effective by pegging to the inflation and it can control asset prices indirectly. That means that monetary policy has no need to peg asset prices, just to pay attention to asset prices fluctuaion.For the factors which affect assets price are complicated,the best way to control asset prices fluctuaion directly is to choose economic, administrative measures and other measures.Such a policy is more pertinent and operational.