The Impact Of Monetary Policy On Asset Price Fluctuations

With the continuous development of global economics and world-wide finance,the fluctuation of asset's price such as stocks,bonds,foreign exchange and real estate becomes an important part in current macroeconomic.We can get directly feelings through the economic bubble in Japan;the subprime mortgage crisis in the United States and the previous price and stock price in China.Since the beginning of the new century,the economic crisis has begun to show signs of cyclical asset price bubbles.Therefore,how to deal with the fluctuation of asset prices has drawn more and more attention from theorists and market participants.Monetary policy,as a powerful regulatory tool,its impact on asset price volatility has gradually become one of the focus of the study.Firstly,this article enumerated literatures form some well-known scholars in this area,and briefly explains it's concepts and theories.After that,this paper discussed the issue by establishing a VAR model system that includes variables such as inflation level,output gap,interest rate,money supply,stock price and housing price.In addition,in order to study the influence of monetary policy on the fluctuation of asset price under different market conditions,this article uses the MS-VAR model to proceed the further discussion.Finally,through empirical analysis of the VAR model,it is found that for the stock price,the effect of quantitative monetary policy on its volatility is greater than the impact of price-based monetary policy.For the real estate price,the effect of price-based monetary policy on its volatility is greater than the impact of quantitative monetary policy.In addition,the research results show that the bubble of the asset market is mainly driven by liquidity.Through the empirical analysis of MS-VAR model,this paper finds that the impact of monetary policy on asset price volatility is asymmetric,that is,the impact of monetary policy on asset price volatility is different under different market conditions.In addition,empirical results show that the effects of different types of monetary policy on asset price volatility under different market conditions are also different.