Micro Asset Allocation And Macro Policy Role Under Uncertainty

After more than 30 years of rapid growth,China’s current macroeconomy has entered a “new period” of moderate growth in the “triple stacking” of growth rate shift period,structural adjustment pain period and pre-stimulus policy digestion period.The future economic trend is still full of uncertainties.Some foreign literatures such as Deng and Wen(2016)pointed out that under economic uncertainty,resources will flow toward mobility and safety(quality).Therefore,in the basic model that contains the two most marketized and core economic sectors,households and firms,this dissertation first discusses the configuration of monetary assets with security and liquidity.In the analysis of extended model,it also includes China’s real estate and foreign economic sectors.One important reason is that China’s financial market is underdeveloped,capital market is incomplete,and security assets are relatively lacking,thus the real estate and foreign exchange assets provided by these two economic sectors are relatively safe and have good liquidity for each family,in particular under these conditions of the economic uncertainties in the world and China have increased,and the demands for “good assets” from Chinese families have increased dramatically,and the “asset shortage” in the market has intensified.Of course,the real estate and foreign economic sectors are also very important in China’s entire economic system.Therefore,based on the Dynamic Stochastic General Equilibrium(DSGE)framework,this dissertation establishs a unified theoretical model to systematically explore these mechanisms about how resources more flow into monetary assets and the real estate in first-and second-tier cities in the closed economy,and foreign exchange assets in the open economy under economic uncertainty,and analyze the effects of monetary and financical macroeconomic policies adopted by the Chinese government to stabilize these economic goals such as output,employment,inflation,foreign exchange reserves,and exchange rates.The author believes that this is the two fundamental issues of the Chinese economy under the uncertain environment during the current post-crisis era.Although for each family,the commonalities of monetary assets,real estate,and foreign exchange assets are relatively safe and have good liquidity,their other properties are completely different.First of all,monetary assets have no price as numeraire,while real estate and foreign exchange assets have prices.Second,real estate,as a physical asset,has certain depreciation and involves land’s values,supplies and demands,while foreign exchange assets involves exchange rates and transnational capital flows.Therefore,in terms of content and structure,it is obviously necessary for this dissertation to analyze these three distinctly different security assets separately.Intuitively,under the increasing economic uncertainties in the world and China,Chinese families will increase the demands for “good assets” such as monetary assets,real estate(especially in the first-and second-tier cities),and foreign exchange assets.This systematic theoretical research finds that under economic uncertainty,similar to these economic intuitions,resources will “get off real economy” and flow toward the monetary assets and the real estate in the first-and second-tier cities in the closed economy,and foreign exchange assets in the open economy,leading to households’ consumption and firms’ productive investment,and entire economy’s total demands and outputs decline;the real estate investment especially in the first-and second-tier cities,and land and commercial housing’ demands and prices increase;and foreign exchange reserves decline along with capital outflow in the open economy.Obviously,this theoretical result is basically consistent with the reality of China’s postcrisis real economy.In a closed economy,in order to cope with the behaviors of micro-households and enterprises tending to allocate more monetary assets under the uncertain conditions,the government’s monetary policy using nominal interest rates as a tool can more effectively smooth the economic fluctuations caused by the uncertainty.The simulation analysis of real estate macro-control policies shows that,if monetary policy rules responding to the economic uncertainty shocks are implemented,then with the increasing of the reaction coefficient of interest rate rules,the symptoms about the deterioration of real economy and the overheating of real estate sector caused by the rising economic uncertainty will ease.In addition,under the restriction of real estate purchases,the adverse impact of rising economic uncertainty on real economy sector has weakened;at the same time,the overheated real estate sector has been somewhat restrained.Of course,the increasing in economic uncertainty and the tightening of home purchase restrictions all will aggravate consumer inequality.In an open economy,in order to stabilize these macroeconomic targets such as output,employment,inflation,and foreign exchange reserves and exchange rates,as a whole,when facing with the impact of economic uncertainty,it is relatively best for the central bank to adopt currency quantity rule and capital control policy responding to the changing of foreign exchange reserves.In fact,this kind of policy coordination is exactly what the People’s Bank of China has chosen in the reality of China’s economy.Unlike some previous domestic studies involving China’s macroeconomic operation and monetary and financial policies,an important premise of this study is the conditions based on economic uncertainty.The core of the basic and extended models of this dissertation is the model’s description of household income heterogeneity and economic uncertainty shock.In fact,under uncertain conditions,using a more unified DSGE theoretical framework to systematically study various micro-asset allocations and compare the effects of various macro-policies in China’s economy,this is the biggest difference or innovation in this dissertation.According to the author’s knowledge,the domestic scholars have not yet done so.One deficiency of this dissertation is that it only mainly analyzes monetary and financial policies.One of the author’s future tasks is to expand it to the cases involving the fiscal and other policies.Another weakness of this dissertation is the failure to put monetary assets,real estate,and foreign exchange assets into a same theoretical model and analyze them together.This is a technical difficulty that has not been overcome in this dissertation.The author has not yet found an appropriate method to solve it.Obviously,this is another important aspect that the author needs to continue to develop this dissertation in the future.