Technology Shocks,Financial Shocks And Asset Price Volatility

Violation of asset prices is a recurring problem in the history of modern economy,often leading to macroeconomic instability,and even large-scale financial crisis.National central banks have been strongly aware of the importance of stabilizing the financial system to stabilize the real economy and to use asset prices as an important indicator of financial stability.Domestic academic circles have also carried out extensive research on asset prices,focusing mainly on the impact of asset price volatility on the economy and how to deal with asset price volatility policy research and other fields.There are relatively few studies on the factors that cause volatility in asset prices.Therefore,this paper focuses on both technical shock and financial shock to study its impact on asset price volatility.We developed a two-sector production based DSGE mode incorporating technical and financial shocks to study the effects and the transmission mechanism of productivity changes and financial environment changes on the price volatility of financial assets.We find that technical and financial shocks play an important role in explaining the price volatility of the financial assets.A positive technology shock or tight financial environment will lead to more severe financial asset price volatility.The difference is that the impact of technology shocks mainly through affecting the capital demand but the financial shocks is mainly through the impact of capital supply on financial asset prices.We further analyzed the relationship between China's economic situation and A-share market trend in recent years,and found that it has a good fit with the conclusion of this paper.Finally,based on these conclusions,we have also put forward some relevant policy recommendations.At present,the government can not simply support the monetary easing policy when actively pursuing the supply side reform to enhance the economic vitality and production efficiency,but should guide the funds into the real economy,to solve the problem of corporate finance,and then to loose the overall financial environment.Only in this way can we effectively balance the supply and demand of the economy on the assets,smooth the possible fluctuations in asset prices.