Can Monetary Policy Target On Asset Price?

With the outbreak of the crisis in sub-loan and the burst of real estate price bubble, the relationship between asset prices and monetary policy become a hot spot at home and abroad once again, but the most literatures at home and abroad are concerned about the relationship between monetary policy and the stock price, and don't carried out more in-depth studies from the empirical aspects of the relationship between real estate prices and monetary policy. In particular, since China implemented reform on housing system in 1998, China's real estate market has been into rapid development. And the impact of house price's fluctuations has played an important part on people's quality of life and socio-economic development with enhancement of income level of residents, speed-up of the process of urbanization, and so forth. While the current studies on the relationship between monetary policy and real estate prices are still inadequate at home, it is still worth further studying and discussing on whether it is necessary and probable to target real estate prices for the central bank's monetary policy or not.Based on a simple model of volatility spillover effects, the BEKK model and the GARCH mean-value equation model, this paper analyzes the volatility correlations among real estate price, money supply and economic growth, and examines the impact of various volatilities on economic growth. It has been found out that the volatility of real estate price and the co-movement between real estate price and money supply have significant impacts on GDP growth rate, and furthermore lead to decline of GDP growth rate. The volatility of real estate price growth rate does not significantly affect economic growth rate volatility, while the co-movement between money supply and real estate price change sharply, and the co-movement between real estate growth rate and economic growth rate does not show significant influence on economic growth rate's volatility. Furthermore, monetary policy has different controlling effect on real estate price in different, cities. The conclusion is that the volatility of real estate price should be controlled, but currently it is not necessary for the central bank to directly intervene in real estate price. To deal correctly with the game relationship between central government and local government in the real estate market is the main content to improve the efficiency of real estate management.The article is divided into four parts:The first part is about reviewing relevant literature and raising problems of body, as well as a reasonable proposition for solving problems. The second part is about establishment of a simple model of volatility spillover effects, MGARCH-BEKK model, GARCH mean-value equation model for the empirical analysis. The third part is the core of this paper, that is, on the empirical analysis of the proposition. In this part, this paper explores the relationship among economic growth, real estate prices, and money supply by using methods of quantitative analysis, especially the relationship between real estate prices and money supply. In the end, this paper analyzes the reason why the policies of Central Bank fail through dynamic game model. The fourth part is about the conclusions and policy recommendations. Through above qualitative and quantitative analysis, we come to the conclusion:At present it is not necessary for the central bank to directly intervene in real estate price. Therefore, Chin's government should start up from the operational level of policy, with fiscal policy, land policy, welfare policy and some administrative measures, to achieve macro-control on prices in order to promote the sound development of the real estate market in China.