Research On The Periodically Deviate Relationship Between Asset Price And Commodity Price: A Perspective Of Monetary Factors

Generally, changes in asset prices and commodity prices should be consistent. However, an increasing number of phenomena and facts are disputing the truth of this basic theory. Over the last20years, most industrialized countries were characterized by a significant feature that sustained rise and drastic decline in asset prices happened during the decline in prices and stable in macroeconomic environment, which is also existed in China. The inconsistent movements of asset prices and commodity price cause a dilemma to government policies. That is to say, the dilemma to suppress asset price bubbles and prevent deflation, as well as to prevent the burst of asset bubbles and control inflation. Both the theorists and practitioners are exploring the solution to the dilemma. However, before the solution to the dilemma, we should first figure out the following questions. What are the reasons for the formation of the price paradox? The frequency of the price paradox is sporadic or frequent? Whether the price paradox follows certain rules or not? What role dose monetary policy play during the process?Firstly, the essay constructs a trinity theory framework including money markets, asset markets and commodity markets based on the expanded quantity theory model of money. We demonstrate the theoretical possibility of the deviate relationship between asset prices and commodity prices with the Keynesian aggregate supply and demand model. Secondly, the essay explores the deviate relationship from the monetary factors mechanism. We research the variation law of money supply, currency structure and the velocity of money, as well as the mechanism of monetary shocks on asset prices and commodity prices. After that, we give an interpretation of the dynamic deviate relationship between asset prices and commodity prices from the angle of monetary factors in a complete cycle of monetary policy. Finally, the essay gives a support to the existing of the deviate relationship between asset prices and commodity prices from the point of empirical testing and practical verification. We not only prove the existing of the deviate relationship and the correctness of the mechanism, but also obtain the specific results of differences in time delay and fluctuations. The main results drawn from the essay are as follows. From the perspective of existence, the deviate relationships between asset prices and commodity prices both on direction, time and fluctuation are existed periodically and regularly. From the perspective of influencing factors, not only the money supply, also the currency structure and the velocity of money affect the prices. The main factors to the deviate relationship are the imbalanced money structure and the differences of the velocity of money as a commodity trading and asset trading. From the perspective of impact mechanism, the reason to the formation of the deviate relationships between asset prices and commodity prices are the different roles of both mechanisms and transmission channels caused by the monetary policy.