Liquidity, Implicit Information of Asset Prices and Monetary Policy Choice
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| Title | Liquidity, Implicit Information of Asset Prices and Monetary Policy Choice
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| Author | Chen Jiyong , Yuan Wei and Xiao Weiguo |
| Organization | Economics and Management School of Wuhan University |
| Email | cjyhubei@163.com; yuanwei-10@163,com; wgxiao@whu.edu.cn |
| Key Words | Liquidity; Implicit Information of Asset Prices; Monetary Policy Choice |
| Abstract | The paper empirically analyzes the liquidity characteristics of asset price boom-busts, the implicit information of asset prices, the macro-control effect of various monetary instruments on asset prices during the period 1998-2011 in China. The results indicate that liquidity plays an important role in asset price cycles, the movements of housing price and stock price contain specific information of future output and inflation, the monetary policy actually responds to asset prices by some degree, monetary regulation and credit control could effectively restrain stock price and housing price respectively, and credit control outperforms other instruments in sustaining macroeconomic stability and curbing asset prices simultaneously. Therefore, Chinese monetary policy should intervene in asset prices when in need, even targeting housing price as conditions permit. Besides, monetary regulation and credit control should be used to restrain stock price and housing price separately. However, it is necessary to coordinate the implementation of various monetary policy tools. |
| Serial Number | WP460 |
| Time | 2013-06-26 |
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