How China Monetary Policy Focus On Asset Prices Fluctuations

The monetary policy of extraordinary significance for monetary stability and financialstability, monetary policy is how to focus on asset prices to determine the impact of monetarypolicy on the regulation of economic efficiency and economic stability. Inclusion of asset pricesto the IS-LM-PC model, build a stable currency index and currency stability and economicgrowth as the goal of monetary policy loss function, the results show that the: monetary stabilityindex is expressed as the rate of inflation, asset price volatility the weighted average exchangerate, the more accurate expression of the monetary and financial situation. Optimal monetarypolicy rule which contains the optimal interest rate rules and optimal money supply rules, theyshould not only focus on asset prices,but also be able to compare accurately they areincorporated into the system of rules.1993Q1-Q22012data combined with VAR method, GMM estimation method (GMM),the state space variable parameter method we have come to an empirical test: China’s interestrate policy and money supply on output the highest attention to growth, output growth has beena core concern of China’s monetary policy goals, but it is not obvious reaction on the stockmarket, real estate and other asset prices, the central bank did not give enough attention to assetprice fluctuations and other factors At the same time, the central bank’s monetary policy on theexchange rate concern is very obvious.Rules for monetary policy, the central bank did not openly affirm to follow interest raterules, but the implementation of a series of monetary policy operation means is more in line withinterest rate rules and optimal intermediary targeting money supply can be seen optimal moneysupply rule characteristics, both in reality and performance stability and coherence. However,China’s monetary policy in a forward-looking aspects have not been able to make significantachievements. China’s monetary policy should be strengthened control efforts and improve theoperation of the balanced so as to maintain long-term stable macroeconomic growth.