The Effectiveness Of The Alternative Point Of View Of Monetary Policy Based On Assets

As an important component of the macroeconomics theory, the theory of the monetary policy has been revised and modified for many years. It is used in various countries' economic development and tested in practice, some cases are very successful but some are lost. The problem seems like that the unreasonable fluctuations in the economy still occur, usually the economy is overheating or overcooling, the reason of which is complex. So what role the monetary policy plays in all of the macro-control methods?The history is repeating itself. In late 2008, the economic crisis spreaded all over the world. In this background, this article combines qualitative and quantitative analysis methods, draws lessons from existing foreign or domestic research results, reviews the china's monetary policy practice during these years. On this basis, it discusses whether the monetary policy in china is effective, and analyzes the virtual economy's influence on the monetary policy transmission mechanism from the angle of asset portfolio. The main contents of this article can be summarized as the following six parts.Part 1; firstly discuss the background and significance of the research. Then give an overview of the classical and latest academic achievements in the research on the effectiveness of monetary policy, some of which is useful to this article's research from the angle of portfolio.Part 2; the theory basis of portfolio's influence on china's monetary policy. Firstly interpret the concept of portfolio used in the test, define its connotation and denotation. Then explain how the portfolio affects the transmission channels of monetary policy and the effectiveness of monetary policy. At last, combined with overlapping generations model of Diamond, this part formally introduces the focus of this article—the influence of asset substitute behavior on monetary policy. Through the theoretical model, we can conclude that the contract between the virtual and real economic rate of return can affect people's consumption and investment behavior, and thus distort the monetary policy transmission channels, then reduces the effects of policy.Part 3; recall the periods of economic fluctuations in USA and Japan's history, analyze their policy's process and results in each fluctuation then interpret these cases with appropriate theories.Part 4; the empirical analysis of portfolio's influence on China's monetary policy. Firstly recall china's monetary policy history, then consider that the policy's effectiveness is weak. Then take stock and real estate market as an example, analyze China's asset substitute situation. Select the 1991-2007 china's monetary policy related data, use the vector auto-regression model in econometrics to analyze these data, then observe the asset substitute's influence on effectiveness of monetary policy in china, then draw some conclusion in the end of this part.Part 5; this is a summary of the previous text. Firstly the reasons of assets substitute are listed, then solutions and policy recommendations are put forward according to these reasons, such as smoothing transmission channels of monetary policy, enhancing the transparency of information, preventing from external diseconomics.This paper attempts to demonstrate the effectiveness of monetary policy from the angle of assets substitute behavior. By the combination of theoretical analysis and empirical analysis, the comparison between foreign and domestic situation and the review of actual cases in history, the theory has been examined. On this basis, I make some policy recommendations and hope to make some meaningful contributions to the China's monetary policy theory.