Asset prices, financial stability and monetary policy

Author: Yu Ming
Publisher:
Publish Date: 2003-10-01
Features: This book examines the interactive mechanisms among asset prices, financial stability, and monetary policy. It discusses the impact and shock of asset price inflation and collapse on the real economy, as well as the challenges they pose to monetary policy. The central question is whether "asset prices should be a target for monetary policy." The basic approach is that asset prices affect aggregate demand through the wealth effect and balance sheet effect, thereby influencing the real economy. Meanwhile, the formation and collapse of asset price bubbles threaten the stability of the financial system. This book primarily uses the formation and collapse of Japan's asset bubble in the late 1980s and the 1990s, as well as the stock market boom and development in most developed countries during the mid-to-late 1990s, as its main empirical subjects. Based on theoretical research and empirical analysis, it gradually analyzes the relationship between asset prices and monetary policy targets, asset prices and money supply and demand, asset prices and monetary transmission mechanisms, as well as the relationship between stock prices and exchange rates and interest rates. It explores questions such as "Why should central banks pay attention to changes in asset prices," "What economic predictive information is contained in asset prices," "Should asset prices be included as a factor in inflation index measurement," "Should asset price volatility be a target for monetary policy control," and "How should central banks respond to price fluctuations." Furthermore, it examines the impact and shock of China's asset price fluctuations and the development of its capital market on monetary policy, and constructs a more comprehensive monetary policy framework for China on this basis.