Assets Price, Bank Lending And Monetary Policy

With the development of financial markets, assets price fluctuations have a greater impact on macro-economy. Many crises such as Japanese economic crisis in the 1990s, East Asian economic crisis and recent subprime loan indicate that large assets price fluctuations can lead to economic crisis. More and more economists show great interests on this topic and present many theories regarding the relationship between asset price and bank lending, which mainly include Fisher's debt-deflation theoretical series, Bernanke's financial accelerator theoretical series, banking crisis theory, etc..Based on previous studies, this paper deeply investigates the mechanism that asset price affects macro-economy. The asset price impacts consumption by wealth effects and investment by Tobin's q effect. These will finally influence macro-economy. The bank lending takes important role in this process. In addition, many studies indicate that there exists interactive influence mechanism between asset price fluctuations and bank lending . This mechanism can lead to bubble boom -burst and finally generates economic crisis.Although there are many foreign literatures on this topic, in China, the research in the perspective of province is very rare. This paper empirically analyzes the relationship between housing price and bank lending based on the data of Shandong province. The empirical analysis finds that there indeed exists the interactive facilitating mechanism between housing price and bank lending. Based on the above investigation, this paper finally examines theories regarding the relationship between asset price fluctuations and monetary policy and then provides some suggestions for China's monetary policy.