The Construction On The Indicators For Monetary Policy Intervention On The Fluctuation Of Asset Price

It has been three years since the financial crisis started from2008aroused bybust of American real estate market, however, asset price, specifically the effects ofasset price on financial stability, has always been the key point of academic studies.And as the global process goes deeper, the effects of asset price become much wider.The focus of traditional monetary policy is the stability of price, but then it has beenchanged greatly by innovation in financial tools. On the other hand, an explicitsupervisory system which is greatly needed now is hardly placed to keep the bala ncebetween financial system and the real economy. Based on this ground,macro-prudential supervisory is proposed.This paper investigates the connection between monetary policy and asset price,and then discusses the appropriate leading index for the asset price fluctuationmeasure. Combined with the special reality in China, we select stock price and realestate price as asset price, and then we determine the leading index of stock price gapand real estate price gap by ADF test and granger test. Index o f stock price gapincluding liquidity indicators such as M1and basic indicators such as current accountbalance. Index of real estate price gap includes M2and credit amount. Thisdetermination of variable is based on that stock price gap can be better explained byM1while real estate price gap can be better explained by M2. Then by VAR and IRF,we determine the weight of each variable, and construct the composite leading indexof asset price fluctuation whose power of explanation is tested afterwards.After empirical analysis, we come to a conclusion with three important pointsof view. First, a serial of index should be concluded in the consideration of monetarypolicy rather than single index for asset price controlling. Second, monetary shouldlean to macro-prudential supervisory in order to guarantee the balance between realeconomy and financial system. Finally, the decision of monetary policy should bedifferent according to different kinds of asset prices.