Asset Price Fluctuation and Monetary Policy Regulation:Evidence from China

Based on the compilation idea of financial conditions index, this paper constructs the asset price conditions index of China by using real estate price, stock price, RMB real effective exchange rate and commodity price index. From perspectives of time-varying and short or long-term by using SV-TVP-VAR model, the effects of quantitative and price-based monetary policies on asset prices are analyzed to depict the change characteristics of China’s monetary policies in different periods. The results show that both types of monetary policies in China have the orientation of pegging to asset prices. As a whole the effectiveness of price-based monetary policy is greater than that of quantitative one. However, there is little difference between the two types of monetary policies in terms of the time required to achieve the maximum level of regulatory effect and the duration of the regulatory effect. The regulation effects of the two types of monetary policies are different in different periods, which is most significant in the financial crisis period, but weakened when the financial supervision is strong. We should further standardize the innovation of financial business, dredge the transmission channel of monetary policy, change the traditional monetary policy regulation mode of “value quantity and despise price”, build a new monetary policy control framework of “price as the main factor and quantity as the supplement”, and improve the dual pillar regulatory framework of “monetary policy + macro prudential policy” so as to stabilize asset prices more effectively.