Asset Price Fluctuation And Monetary Policy Response

The role of asset prices in the macroeconomic and how the monetary policy to deal with the volatility of asset prices,after the global financial crisis and the crisis,more and more academic attention.Before and after the crisis are accompanied by substantial fluctuations in asset prices,but also lead to economic problems continue,It also prompted people to begin to rethink the feasibility of using monetary policy to deal directly with asset price volatility.The problem in China seems to be more urgent,as China's economy enters a new norm,the Chinese government,while maintaining steady economic development,has gradually increased its control over financial risks,positive fiscal policy and prudent monetary policy become the overall plan for the Chinese government's economic policy.Controlling risk has become an important task to ensure GDP growth,for the current Chinese economy,the real estate and the stock market has a significant impact on macroeconomic and national wealth,and asset prices as an important benchmark for risk naturally requires the monetary authorities to give a high degree of concern,especially the volatility of asset prices may be implied risk is worth monetary policy makers think.Therefore,in this paper,the monthly data from 2000 to 2016,empirical analysis of China's asset price fluctuations on the impact of output and inflation information,and the monetary authorities to respond to fluctuations in asset prices.For now,The theoretical model for studying the relationship between monetary policy,asset price and output is mainly the introduction of the Taylor rule after the introduction of the asset price,the modified New Keynesian model,the IS curve and the Phillips curve.Based on the new Keynesian empirical model,which includes asset price,this paper analyzes the interaction between asset price and macroeconomic,and then obtains the possible situation that asset price affects output and inflation.The new Keynes model,which includes the asset price,can describe the relationship between variables in the macroeconomic context from four aspects:aggregate demand,Phillips curve,asset pricing model and monetary policy.The asset pricing model uses the asset capital pricing model and encourages pricing to describe the impact of asset prices.Monetary policy is the use of the Taylor rule to join the asset price to represent the monetary policy equation used to analyze the interaction between monetary policy and asset prices.In this paper,based on the empirical model of Tang Qi-ming(2009),Li Cheng(2010)and Gu Haifeng(2014),through the empirical analysis of the empirical model,we can get the economic relationship between output and inflation,asset price and monetary policy,combined with Granger causality test to set the constraint matrix of SVAR model,finally,the correlation between the impulse response function graph and the prediction variance decomposition is obtained.Based on the empirical model of macroeconomic variables,monetary policy and asset price fluctuation,this paper analyzes the empirical relationship between variables.And then establish a 7-variable SVAR model including GDP,CPI,interest rate,M2,credit,house price and stock price,according to the economic relationship between variables,the constraints of SVAR model are imposed,and the pulse corresponding function analysis and prediction variance decomposition between variables are emphasized,So as to obtain the relationship between the variables,to draw a more credible conclusion.After analyzing the economic relationship between variables and the empirical analysis of SVAR model,this paper draws the following conclusions:First,fluctuations in asset prices have a negative impact on output.When the asset price rises,the short period of time may be through the wealth effect and investment effect will also increase the output,but the continued rise in asset prices will increase social speculation and reduce the consumption of renters,which will show a negative impact,making the output level lower,the negative impact on the macroeconomic.This shows that high prices and stock market volatility will be detrimental to the smooth operation of the macroeconomic.Second,compared to the real estate market,the stock market is more responsive to monetary policy.By comparing the monetary policy tool variables on the impact of housing prices and stock prices,found that the impact of monetary policy on the impact of stock prices than the price much larger,the impact of monetary policy will make the stock through the liquidity effect quickly to the economy in all aspects of transmission,the stock is relatively easy to realize the property itself is also makes the stock price reaction to monetary policy more sensitive.But the impact of monetary policy on the stock price is also shorter.Third,interest rates have a much longer impact on asset prices and output,and credit has a faster impact on output and asset prices.Comparing credit and M2 to asset prices and output control,interest rates have a greater impact on output and asset prices,interest rate as the core tool of monetary policy,can affect the financial system of capital costs and asset price income levels,and play the expected effect of economic development.Fourth,M2 is not suitable as a monetary policy control tool.Compared with the impulse response function diagram and the variance diagram,it can be seen that the fluctuation of the asset price has a negative effect on the macroeconomy,but the effect is small,while the effect of M2 on the output is greater.The increase in money supply will increase the price level of the whole economy while pushing up the price of assets,which is more unfavorable to the macroeconomy.