The Research On The Formation Mechanism Of Optimal Monetary Policy Under The Asset Bubble

The excessively rapid rise in asset prices has become a major concern for policy makers and the general public.At the same time,the asset bubble has seriously affected the vitality and stability of the national economy.The report of the Nineteenth National Congress of the Communist Party of China stated that it is necessary to fight against and resolve major financial risks.In this era,exploring the issue of optimal monetary policy in the case of asset bubbles has become a hot issue.From the academic point of view,the traditional monetary policy theory is based on assumptions such as rational people and market clearing,but these assumptions are not realistic.If we simply apply the traditional monetary policy theory,the consequences will be unbearable.In addition,in the traditional monetary policy theory,the role of the financial sector in the formation of asset bubble is not clear,and policy makers are also unclear what role the financial sector plays in the formation of asset bubble;Based on this logic,our model is based on heterogeneous enterprises and the enterprises face financial friction factors such as credit constraints,transaction constraints and mortgage constraints.By introducing financial friction factors into a dynamic stochastic general equilibrium model,the asset bubble model in an indefinite period is discussed.By exploring the dynamic response of economy under different monetary policy rules under three different shocks,we have clarified the internal linkage mechanism between monetary policy and asset bubbles.At the same time,in order to explore the optimal monetary policy in the case of asset bubbles,this paper uses the welfare loss function to compare monetary policy.The conclusion of this paper shows that the asset bubble originates from two types of liquidity premium;the first type of liquidity premium refers to the investment income obtained from the investment of own assets such as own funds,savings deposits and bubble assets in the case of asset bubbles The second type of liquidity premium refers to the investment income from the use of bubble assets as collateral to obtain funds from bank loans for investment.The existence of two liquidity premiums causes the price of asset bubbles to rise,which has led to higher inflation;higher inflation will lead to an increase in the company's net wealth and investment,so that more companies will participate in the investment,the boundary of investment value will be lowered or the Tobin Q will rise,leading to an increase in the liquidity premium.This increase will lead to an increase in the possibility of bubble assets or the formation of more bubble assets;At the same time,we have proved that monetary policy can affect the magnitude of inflation to counteract or promote asset bubbles.By analyzing the impulse response graph of economy under different monetary policy rules in the face of technological shocks,monetary policy shocks and emotional shocks,we find that the linkage mechanism of different monetary policies in the case of asset bubbles is similar,however,in some economic variables such as the consistency of the direction of changes in consumption and investment,and the direction of capital return,different monetary policies have shown certain differences.In addition,we confirmed that under the DNK framework,monetary policy is always non-neutral.Tight monetary policy will help to suppress the formation of bubbles,and expansionary monetary policy will promote the formation of bubbles.In addition,what is surprising is that the impact of monetary policy has the greatest impact on the economy among the three impacts,rather than the technical impact we recognize,while the impact of emotion on the actual economic variables in the three impacts is very weak.Finally,this paper measures the volatility of economic variables under different monetary policies through the welfare loss function.It is found that under different exogenous shock backgrounds,the optimal monetary policy is different;Specifically,the weak inflation target rule is the optimal monetary policy under the impact of technology,the strong inflation target rule is the optimal monetary policy under the impact of monetary policy,and the Taylor rule is the optimal monetary policy under the impact of emotion.