Study On Effects Of Hot Money To China's Asset Price

China's economy has developed rapidly since the 21 st century.In the context of RMB appreciation and high interest rates,hot money began to enter on a large scale,bringing great effects on stock market and real estate market.But in recent years,with the withdrawal of QE and the economic downturn of emerging countries,hot money gradually exits from China.The U.S.subprime crisis in 2007 and the stock market's boom and bust in 2015 made people realize that the liquidity of hot money can be reversed instantly.It will have incredible effects on prices by many ways,as well as on stability of economic system and independence of monetary policy.In this background,this article theoretically assumes that hot money can directly impact asset prices of stock market and real estate market.It can also influence asset prices through indirect way of exchange rate and money supply.At the same time,policy of the maket have impact on the relations of hot money and asset prices.Firstly,based on the inflow ways of hot money,this article estimates the scale of hot money from January 2002 to October 2017.Then,it analyzes the cycle of hot money,stock prices and house prices by spectrum analysis,and finds out that their periodic fluctuation has co-denaturation on the whole.Secondly,referencing to LuRong(2012),this article divides stock market into bear market,small bull market and bull market,and divides real estate market into falling market and rising market.Then it uses MS-VAR model to analyze the nonlinear influence of hot money,real effective exchange rate and money supply on stock prices and housing prices.The results show that over the whole interval,hot money has both direct and indirect influence on stock prices.It has no direct impact on housing prices,but has indirect effects through intermediary variables like real effective exchange rate and money supply.The three regions of the stock market are in line with the actual Shanghai stock market.The transfer of the three zones is asymmetrical.Whether it is a bull market or a bear market,it has to be buffered by a small bull market.In addition,the impulse response of hot money to stock prices is related to the state of stock market.When stock market turns down,hot money will outflow.Then exchange rate depreciates and market liquidity shrinks.But it will be offset by the introduction of government's liquidity policy.And stock prices will not continue going down.When stock market grows,hot money inflows,and stock prices will go on rising.The better the stock market is,the greater the upside.The housing market is also in line with the real estate market and the rising market is stable.When the real estate market turns down,housing prices didn't fall in spite of the devaluation of RMB and the outflows of hot money.And when the real estate market grows,hot money inflows and housing prices will continue to rise.Finally,according to the theoretical analysis and empirical results,it puts forward advice on how to lead the flows of hot money to improve the development of stock market and real estate market.And it also advises on formulating a proper exchange rate system and monetary policy.