The Study Of Our Residents Of Asset Price Fluctuations On The Wealth Effect

In recent years, national capital market developed rapidly and it hasplayed anIncreasingly important role in the financial market.As an importantindicator of the capital market asset price had a significant impact on thenational financial system and macroeconomic.In the world, the stock and the real estate have had a growing greaterinfluence on consumer behavior in Europe and Japan since1990.Anddifferent types of asset had different effect in different contries. From adomestic perspective, the stock and real estate has become a major assettypes held by residents, capital market has become a top priority ofChina’s macro-control policies. Then whether does the wealth effectsexist? Where are the root cause of the wealth effect? The basic theoreticalproblem has not been completely resolved. The different understanding ofthese issues and judgments will lead to different macroeconomic policies,and thus affect the effectiveness of macroeconomic policy and the economy’s health. Therefore based on the study of wealth effect inEurope and America and other developed countries by senior scholars, webegin to study the wealth effect in China and explore the mechanism thatthe volatility of asset prices affact the national economy. It can greatlyhelp us to aware of the channels of the stock price and the real estateprices on consumption contributing to the overall growth in consumption.Based on the theory proposed by scholars at home and abroad,combined with the status quo of Chinese capital market, this paper gatherquarterly data from first quarter in2001to second quarter in2011.Basedon the LC-PIH model, we study the direct and indirect wealth effectbetween the stock market and the real estate and the consumer spending.The empirical results show there is some wealth effect between the majorasset and the consumer spending. As time go on, the wealth effect instock market will increase and the wealth effect in the real estate willdiminish. But the result is different from the result got by scholars inother contries. Finally, based on the empirical results, we make relevant policy recommendations on how to give full play to Chinese wealth effectof asset prices and macroeconomic policy formulation and adjustment.