Stock Price: Economic Function and Monetary Policy Response

Author: Liu Lanbiao
Publisher:
Publish Date: 2005-06-01
Features: This book focuses on researching the microeconomic functions of stock prices in influencing consumption, investment, and financial stability, as well as the macroeconomic functions of stock prices in affecting the monetary relationships of the entire economy. It analyzes the corresponding monetary policies and proposes principles for monetary policy responses. The book also examines China's stock price inflation phenomenon and the corresponding monetary policy operations. The book is divided into four parts:
Part I, Chapter 2, focuses on the formation mechanism of stock prices. The research in this chapter shows that the intrinsic logic of stock pricing differs from the logic of pricing goods and services in the real economy. Fundamentally, the capitalization pricing method followed by stock prices is essentially determined by the rules created by investors, which dictate the price of stocks. The theory of stock price bubbles confirms this logic of stock price formation. Whether it is rational bubbles or irrational bubbles, or whether it is noise trading or herd behavior, they are all outcomes of investors' investment behavior under real-world conditions, driven by their perceptions.
Part II, Chapters 3 and 4, studies the economic functions of stock prices. Chapter 3 analyzes and summarizes the microeconomic functions of stock prices, specifically their impacts on consumption, investment, and financial stability. This chapter also reveals the objective inevitability of stock prices influencing financial stability and analyzes the mechanisms by which stock prices affect bank stability. Chapter 4 focuses on the macroeconomic functions of stock prices, primarily their influence on the monetary relationships that sustain the entire economy's operation. This chapter clarifies the role of stock prices in maintaining equilibrium in the money market and stock market, and analyzes the inducement and absorption effects of stock prices on the circulation of credit money.
Part III, Chapter 5, studies the response of monetary policy to stock prices based on the above analysis of the mechanism and functions of stock prices, and proposes response principles.
Part IV, Chapter 6, analyzes China's stock price inflation problem since the 1990s and evaluates monetary policy.