Asset Prices Transmission Effect Of Monetary Policy In China

Since 80 years of the 20th century, with the growing size of the asset market expansion, asset price volatility has an increasing impact on the economy. Especially for the influence on the intermediate target and the ultimate goal of monetary policy, has made the relationship among monetary policy, asset markets and real economy become a hotspot.China is in the current period of economic transition, and the ultimate goal of monetary policy is to maintain monetary stability of the currency so as to promote steady economic growth. The rapid development of the asset market directly affects the money supply and demand, through the monetary policy setting and implementation. The deepening of asset markets has made the transmission mechanism of monetary policy more complicated; leading to policy makers faced more challenges as of making research on the operation of monetary policy objectives and means of implementation. Therefore, the importance of the study on monetary policy transmission effects of asset prices has become increasingly prominent.The main purpose of this paper is to analyze whether the monetary policy transmission effects of asset prices is significant or not. Based on previous studies, the empirical research is divided into two parts:the first one will study the impact of China's monetary policy on asset prices; On that basis, the second is about the influence of assets price on the real economy, as Description of asset price transmission of monetary policy effects are significant and the transmission channels are open.The first chapter is an introduction. By introducing the research background and significance, it indicates that the necessity and importance about the transmission of asset prices. Through literature review, we can understand the past and present study, the status of domestic and foreign research, and then questions are found out. Based on this, framework of this paper is given, including innovation, defect, research ideas and contents on the paper.The second chapter presents monetary policy transmission theory of asset prices. Section I describes the four channels of monetary policy transmission; Section II induces some ways of the three tools of monetary policy and interest rates affecting on asset prices; Section III gives the respective effect of asset prices on output and inflation rate. The main purpose of this chapter provides a theoretical basis for the later empirical analysis.The third chapter is about the theoretical model and empirical research methods used by the following chapter. S VAR model is introduced; a brief description of HP filter method is given, as well as unit root test, Johansen cointegration test, Granger causality test, impulse response functions, variance decomposition and the concepts and principles used in SVAR. All of these provide a tool for operations of the empirical analysis.The fourth chapter is empirical part of the paper. Through the establishment of SVAR model, the monetary policy transmission effects of asset prices are studied. In the empirical study there are two parts. Before the analysis, the instruments of monetary supply for the proxy variable selection are discussed. Specifically, there are three sections of this chapter analyzing monetary policy transmission effects of asset prices:SectionⅠoffers the choice of variables and sample data sources; SectionⅡdescribes the impact of monetary policy changes on asset prices using H-P filter and make qualitative comparison; SectionⅢis the key part of the paper, this section makes a quantitative analysis of the monetary policy transmission effects of asset prices based on previous parts——monetary policy impact on asset prices and the asset prices on output and inflation rate.Finally, in the last part we give out the conclusions of the paper and describe the difficulties which may be met in the future of the study and instructions of problems during the further research on this aspect.