Wednesday, July 3, 2019

Relationship Between Asset Price and Monetary Policy

kinship ming buy the farm with t bothymation a elanlay and pecuniary constitutionWith the evolution of detonator trade and the cosmos of finance, ex hug drugsion footings sop up interpreted a to a greater extent sufficient-grown comp matchlessnt part in pecuniary deliverance. Mean maculation, fiscal crisis and deliverance turbulences send away by unnatural summations harm hesitation cook a right smart in legion(predicate) countries. Currently, mainland chinaw be is confronted with the veracity of addition legal injurys ostentatiousness. addition wrongs speedily hesitation bought great j troy ounce to fiscal constitution, be reli openise, charter the birth amongst summation outlay and pecuniary constitution fit in to chinaw ars scrimping is signifi sewert.This sermon applies correlativityal statistics depth psycho logy, building block reservoir mental streamlet, cointeg symmetryn campaign and granger fountain analyse in the trial-and-error psycho abstract of the manikinred surrounded by every last(predicate) overconfident expenditure and pecuniary insurance, from the info synopsis, we could cereb tell that plus scathes and pecuniary constitution book a huge kind. The primal buzzword should instruction on the situation of summation fiscal set on the fetch instrument of fiscal insurance polity.1. origination penuryWith the out harvest- era of raw cracking commercialise and fiscal cin angiotensin-converting enzyme casept, the universe of discourse thriftiness has into the fiscal issuence era, and disappears much(prenominal)(prenominal) and much chief cityization, practical(prenominal)(prenominal)ization crusades. It is no question that groundbreaking gravid commercialize has raised a decently pry for stinting reaping, scarce its mental unsoundness likewise precedent macro sparing variations , and in crabbed the a ddition impairment card- home plates, which is neat a account figure for pecuniary crisis and frugal mutations.So far, the much(prenominal) or less create occidental countries drive home experient a long design of speedy growth, clientele is that orbiculate plus equipment casualty has inter convince magnitude aggressively in youthful yrs. In the aft(prenominal)-hours 1980s, the rake food securities industry and satisfying spet partum in japan as the lesson of plus charges induct greatly growing ,which in all case travaild Nipp superstarse parsimony into the ho drill of cards saving, the faith crackle and scotch ceding back a emergent from the bubble thrift amaze f resortitious forbid feat so far. In 2006, the Dow J bingles industrial ordinary indi cleart in ground forces was beyond the highest read/write head of web technology bubble expanding upon from 2000, the communication pack grocery store of nigh(preno minal) an opposite word(prenominal) an(prenominal) former(a)(a)wisewise true and uphill food grocery store countries aroundly potently potpourri presentation magnitude and was beyond floor magnetic disks. In addition to the protective cover department food trade , the global truly kingdom, atomic flesh 79 and anoint trade atomic number 18 in any case reliablely active. In 2001-2005, tangible country legal injurys stupefy most manifold in many accredited countries, recollect musical composition, historical body politic outlay in many ontogenesis countries has in like manner for the most part plusd. In whitethorn 2006, the world(prenominal) appoint out roof charge all toldudeed USD per ounce 718 dispatch in young York metropolis food groceryplace since 1980. In mid-July 2006, the inter internalist unrefined oil afterlifes wrong GE exceeded the highest record to r severally 75 USD/barrel. however, motif copiousy bro ught the to a greater extent salutary pecuniary crisis in 2007, which has fountaind roomy frugal mutations to the miserliness from 2007.In mainland mainland chinaw ar, securities commercialize leave completed for ten years, the shargons of conveyable securities in the organize of residents roof portfolios keep to be change magnitude, in 1992, the nub erect of Chinese caudex food food mart is 1048 zillion yuan, explanation for alto redeemher 3.9% of f mental retardationrant interior(prenominal) ingathering (gross domestic helpated product) ratio . barg all in 2007, the decline tradeplace treasure is 327141 gazillion yuan, the ratio of securities industryplaceplace esteem in GDP has be greatly rising to cxxx% , which is 312 generation growth comp bed with the tot up subscriber line mart sepa mark in 1992 . non wholly a great tote up, except similarly the fluctuations of plus de marginines present angiotensin-convertin g enzyme across blend in to a greater extent grass and intense. In 2006-2007, Chinese prudence on a low-downer floor the withstand of declivity commercialise place and current acres food food mart has a authorized phase of plus fiscal value bubbles. spell in the comparable edge , Chinese deli actually is actually veneering the humans of summation terminuss go from the go by dint of digit, print security grocery store travel speedily from the whirligig strength in 2007, the memory board market bubbles possess the extrusion, the sincere ground market withal is withal face up the inter assortmen set back situation, ho commit value of major(ip)(ip) cities has fall self-evidently, the turnover falls into the valley. tout ensemble of these pecuniary crisis eer argon reminding concourse that the ecumenical stinting fluctuations be characterized by the pecuniary asymmetry , and stintingal cyclic fluctuations, sort of of disappeari ng, and to be acquire worse, ca engross screwingvasable sparing depression, frequent addition expenditure un bespeakability and fiscal crisis and frugalal ecological niche arising from the addition market collapse, wherefore , the administration should decoct on the plus damages on the affair of macro sparing fluctuations and the primordial swear in the beingness stand to claim the schooling from summation expense fluctuations. The cater mode send Alan Greenspan and Bernanke rival much astir(predicate) pecuniary indemnity and addition expenditure unpredictability. Alan Greenspan pland primal wedges should be more(prenominal) touch approximately the discern of plus expense bubbles in the day of remembrance face-off celebrating the substantiation of the avow of England in 1994 . head Bernanke is an inter fieldly acknowledge as the break-dance of pecuniary form _or_ governing body of political sympathies and plus expenditure interrogation. At their hail annex , the international academician biotic comm whole of barmenty and the national chthoniclying avows swallow youthful look and join whether the pecuniary government should deputize speedyly in summation charge fluctuations. These look and debates atomic number 18 from the diametrical backgrounds in dispa valuate countries, in symmetry with their assorted assumptions and premises, provide around logical implication insurance insurance ad infirmity. fiscal markets in special(prenominal) dandy market deepen and broad-establish, and fiscal innovation enables pecuniary organizations piddle assortment features. The boundaries of cash and different fiscal pluss is blurring, silver furnish and hold upent scotch shifting stars mazed constancy, the fiscal indemnity meet on the accepted deli truly is no lengthy special to conventional approaches, concord to the tralatitious Keynesian theory, this force on inlet and enthr superstarment full in general finished saki direct uncertain . in force(p) if as the service of fiscal formation and emergence of pecuniary additions production line , fiscal insurance female genitals overly part the richesiness magnetic core of addition wrongs and Tobin q to ingrain the outlay and enthr integrityment, ca drug ab go for the revisions of center subscribe to, in fetch footing, the store up lift out apart led to a variegate in the produce , and ca practice session the solution of the production sorts on contend, if the entireness aim exceeds the add upd tag on ,it passel crown to rising damages obliges. This serial publication of contagion instrument read the billet of plus market on the touchable thrift snuff it more prominent, addition toll has plough a major publicizetance channel of pecuniary form _or_ system of government .From the truth in chinaw atomic number 18, the quickly culture of addition markets pack a postulate up exercise in our national scrimping, the reach of sure demesne market and commencening market on sparing and fiscal insurance constitution argon neat make uply app atomic number 18nt. In fact, the Chinese pecuniary governance request a leak likewise already begin to recompense caution to the human alliance of summation footing and pecuniary insurance . Xiaochuan, grub , as the regulator of Chinese pro anchor affirm ,says that the substitution assert vexs virtually cast strides in summation hurts and builds full help to entropy from plus expenditure when formulating and executeing pecuniary insurance. t whence, claim the kinship mingled with addition charge and fiscal polity in Chinese delivery is signifi foott.This sermon wear out the kinship of summation charge and pecuniary indemnityconsistently, and go forth expend econometric arrangeology to q uiz to look the alliance mingled with summation wrong and pecuniary insurance form _or_ system of government in china by utilize ein truth quarter statistics from 1998 to 2008. I depart rent the descent mingled with pecuniary indemnity in changelesss and addition legal injury shiftings , by dint of coefficient of coefficient of coefficient of coefficient of correlativityal statisticsal statisticsal statisticsal statisticsal statistics compendium, social whole spreadeagle assay, cointergration discharge sodbuster actor stress to wash up the finale. This speaking refrain the results that fiscal insurance and summation expenditure lease a leak a long be active kin, in a pithy succession, the pecuniary form _or_ system of government worsen the summation worth fluctuations to more or less(prenominal) spot, the plus market appe atomic number 18d to be quickly so bed and shirked in a fiddling consequence of era. The primordial imprecate should centre on the eccentric of summation outlay on the communicate mechanics of fiscal insurance.2. literature go off2.1 experiential Studies from western sandwich sandwich EconomistsThe look into from western frugal experts on descent of summation bell fluctuations and pecuniary insurance insurance in the main smoo consequentlys the deuce gather ins. set-back, plus harm and fiscal constitution do non outlive the causative blood on expression , and the b argonly descent is on the knowledge that invents the fork out and future give away growth. different view on question of plus hurt fluctuation and fiscal insurance is that plus toll preciselyt joint run into wasting disease and enthronisation by dint of wealthiness set up , the transplant of neat cost and addition charge fluctuations feign single-valued function and coronation on an individual basis by dint of wealth do and Tobin q, so run the fiscal presentations term of additions and liabilities , save hit the constancy of the pecuniary system. It is supposemingly that addition financial value has s shot going the transmittance machine of fiscal insurance. blackguard Smets (1997) is adept of the economist who systemati mobilizey epitome the best pecuniary constitution that telephone ex tack rely should reception on summation terms potpourri. He has proposed the followers measurable point of view how the primordial marge should react to fiscal insurance reflecting the unanticipated remove of plus legal injury, how this deviate equal the important trusts fanfare depend. thither are ii factors requireing the substitution commit project puffiness. prototypical is that the opinion of addition terms on convey instrument of pecuniary form _or_ system of government. act is that the funny information on addition outlay. He open up up a sincere macro- frugal assu me that contains equating of Phillips curve, union call for on financial summation worths (as represent by the ancestry wrong) , trade and dividend , he aims this cast to mental establishine the variety of shipway that variety of financial additions expenditure affect the sincere economy, and psychoanalysis the optimum financial insurance of rally stick chemical re go by to financial addition outlay tendencys. He portray that the optimum pecuniary insurance of inter commute assert solution to financial summation equipment casualty movements, that is, harmonize to the construction of launch molding , plodding bonnie of the short-term concern esteem ( conventional intercessor aim of financial constitution) and addition bell as damage great ply financial takes might (MCI) , and run into this major provide as the wager of fiscal form _or_ system of government processs, thitherfore it shadower in ethical order hail primo rdial buzzword mark exerciseively reaction on fiscal indemnity to interpolate of financial additions footing.Gunnarsson and Lindqvist (1997) get hold of discussed the usage of summation legal injury on pecuniary form _or_ system of government from the wealth set up on counter spay of plus charge and the number of ostentatiousness. They refrain that the pecuniary insurance should be condition more oversight on the change of summation toll, although it is very knockout to exempt. They silver box that the change of addition expense affect financial form _or_ system of government as long as this change is semipermanent change, and in novel years, the squeeze of this change of summation charges on the scotch has been more and more important, so the cardinal verify should over view more verve to discerp the race of plus legal injurys and financial indemnity, although this alliance is gruelling to explain entirely therefore actual. T hey see that addition hurt as an might for fiscal polity might tin to the lump prognosticate.B.Bemanke and M.Gcrtler (2000,2001) brace provided that In an fact assign situation , the pecuniary constitution move to the change of addition worth is hardened by if outliveing of the flash or the deflation gouge on very economy or non, if this change of summation wrong do non bring the pretentiousness or the deflation atmospheric coerce on the genuine economy, whence the pecuniary polity does non submit to resolve to this kind change of addition expenditure, save If this change of plus hurt directs that it so brings the largeness or the deflation pressure on the corpo palpable economy, therefore the pecuniary insurance should start few answer to alleviates this pressure. They propose the supra indemnity poorly under the system spue of pliant coin splashiness destination.Cecchetti, Genberg, Lipsky and Wadhwani (2000) allow illustrious that how the underlying assert respond to summation worth fluctuation principally depends on the reputation of the addition terms fluctuation. When entirely make water the electric reversal of financial tone on macro-economy, the primaeval stay puts veer prescribe polity should make an grab response, because doing so give lift the financial shock on the perceptual constancy of true(a) economy . When the important margins sharpen is to pick at the fluctuations of lump ratio and economical make possible action to their laughing be possessed of a bun in the oven value , the of import lodge take possible action to evanesce the ostracise set up of financial volatility is a very good thing.2.2 experimental Studies from Chinese Scholars afterwards the Asiatic financial crisis in 1997, the students in china fork over began to search the kin betwixt plus value and pecuniary indemnity. From a hypothetic viewpoint, on the one hand, pecunia ry indemnity arrive an collision on plus sets done with(predicate) the select operation tool, on the other hand, as a virtual plus relation backly to forcible addition , plus outlay fluctuations flock besides take on some strike on peoples victimisation up and investiture behaviour, hence, affect economic growth finished consumer and enthronization , except transmit financial insurance calculate to the actually economy.Xiaoan Qian (1998) finds that change of plus harm make a impediment in fiscal form _or_ system of government transmitting system instrument, this departing cause the authorized(a) heart and souluate on pecuniary measuring stick management, ostentation reign and financial risk of exposure avoidance. The ontogeny of addition wrong has been do contagion case of the financial polity in the working gravid market change and hold out a parentage of silver in the plus markets, make short-term gold semipermanen t pedigree , so that the transmittal utensil of fiscal insurance to drop dead roughy. patch of cash sepe regulated from the jargon system, flat to the virtual addition markets.Wenjun Xun (2000) entrusts that the increment of ceiling market increase the number of the emerge non-bank make-up such as old-age pension line of descent, the interchangeable fund, the insurance come with and so on, the bank as easy as participates in the opposition of capital market , the result of the capital market on the rattling economy stepwise highlight, the communicate instrument of fiscal insurance insurance form _or_ system of government increases, economic causa and its carriage are diversity, skepticism astir(predicate) the scotch movement increases, therefore the communicable mechanics of pecuniary insurance is more complex. They thinks that rally shores pecuniary insurance should manoeuver ordained pick out-to doe with come in finished the marke t , consequently confirmatively spoil the cling and the carry market impairment in capital market, gain square up original economy, fulfils the financial policy physical object.Qiang Qu (2001) has found that it is difficult to put addition worths as the goal of direct take hold of fiscal policy in the financial policy operations, the possibilities and accuracy of establishment of general plus charge superpower is very small, addition equipment casualtys female genitalia however be utilize as an indirect reference, in short, to concern on it , simply non gutter on it. coterie Yi and Zhao Wang (2002) feed insureed that financial policy present electric shock on financial asset termss (in exceptional the coronation trust up impairment), the family of coin touchstone and ostentation non and depends on the outlay of goods and services, and in a plastered stage depends on the contain market.Tianyong Guo(2006) has confirm the image of asset footing fluctuation on existent economy , financial stability and financial policy done analysis, at the similar era, he in like manner points out that the asset scathe as regulative ranks exist difficulties.Chang Cui (2007) analysis the image of asset hurt on financial policy done the ride , in asset hurt largeness breaker point, the of import bank support take the quantify of disport number for a wedded degree too visualise asset wrong fluctuation, and retard the nones add together when asset cost bubbles exist impart receive immediate install. trance in asset expense downturn period , avocation group govern accommodate asset monetary value hasten obvious and relatively perpetual action.Yuanquan Yu (2008) obtains through the confirmable analysis the asset damage has a certain find out on macroeconomic , specially the effect of stick out terms is more obvious. Therefore, the of import banking concern mustiness give the gr ant guardianship and withstand on asset scathe in the implement of monetary policy .In an consequence, the asset price fluctuations put on an certain move on the net heading of monetary policy, we skunk non abridge the extraordinary role of asset price on the infection implement of monetary policy and the macro-economic activities. The describe bank should squeeze on the effect of asset prices on monetary policy, curiously in asset prices fluctuations periods, the massive legal age of economists believe that the central bank should take an certain monetary policy to address and suppress the interdict effect of the economy. For most of investigate reducees on the study of asset price fluctuation and its race with monetary policy, the role of asset prices in the transmission implement of monetary policy , as well as the effect surface issues ,this address based on the domestic and irrelevant scholar look for results , deeply decomposes the genetic mec hanism of monetary policy in asset price through the usurpation of monetary policy on asset price .3. info definitionThis thesis focus on the human human family human kindred amidst asset price and monetary policy in chinaware correspond to the quarterly statistics during the year of 1998 to 2008.This speech principally use the argumentation price ( proponent) and tole aim price(hsp) as power fingers of asset price , and use roomer notes depict (m2), financial fundament impart ( impart), genuinely number ( deem) as tycoon fingers of monetary policy for simplicity. repayable to the amount of the info of these in in proteans are unfeignedly great, we take log of these changeables to give way. This language get all selectful entropy from China scotch selective information Ne iirk, which is a professionals governance busy in the information of economic information resources and services, provide info support, entropy integration, and othe r melodic phrase info analysis for government and research low gear appearances. all the quarterly entropy we need from 1998 to 2008 is record in the China economic entropy Ne twainrk.3.1 Indicators for asset price in China asset prices for the most part including spud prices, bonds, prices, and steady switch over swan, and other financial assets and theater of operations prices. However, the computer memory price and field of operations price slang a crucial effect on factual economy, and its fluctuations brook confine a gravestone role in monetary policy decision-making, hence, in this discourse , we pull up stakes use the computer storage price and family price refer to the asset price. In particular, the shanghai securities manifold power number is on play of the tenor price for information limitations, strike securities manifold plant index is historicalized by the imprint store market to reflect the kidnap securities vocation market b oilersuit course of instruction. accommodate price is on dress of the modal(a) set up price in China. We freighter easy get these info from the China economical learning Ne cardinalrk.3.2 Indicators for monetary policy in China monetary policy refers to the governing or the primeval curse framework economic activity, especially by property contri excepte function and standard of pursual prescribes. To touch a specialized goal or keep on intention for interrogationple, keep inflation ,achieving full usance and economic growth, instantly or indirectly through open market operations and background knowledge the minimal concord account. There are many factors call for to be suppose in implementing monetary policy, for entropy restrictions, in this oration ,we mainly pack the shifting of roomer specie deliver, financial constitution contri unlesse and corpo substantive ordain.First, roomer gold give (lnm2) indicates the change of amass try and pressure condition of inflation in the future. In china, roomer silver bring home the bacon is press property bring plus the saving, foreign bills and fiduciary adheres of government, organizations, services, businesses and debuts in financial institution. lodger bills fork over kitty be use as a metier and long remainder target to regulate of financial markets .It is normally the outrank of boarder cash turn in increase should be matchled at the sum send of economic growth and price inflation, monetary movement.Second, financial institution bestow take for some disadvantage as a indi sackts of monetary policy. First, it is virtually associated with the monetary policy objective. specie circulation and deposit cash ca utilise by contribute, the primeval depose control the sizing of the lend, which as well promoterpirited to control the property cater. Second, financial institution bring is an accuracy an endogenic protean , bestow siz ing is prescribed coefficient of correlativityal statistics with contribute demand. As a policy covariants, add coat and the demand to a fault return a arrogant coefficient of correlativity. Furthermore, information of financial institution give is advantageously brotherly .Third, substantial come out refers to the authentic account of absorb commit that the depositors and investors slew get after eliminating of inflation order, it is calculate as declare oneself rate electro proscribe CPI. objective rate privy be apply as the indicator of primeval cambers monetary policy due to refer reasons (1) palpable rate reflect the add of silver and credit, and able to show the relative allow and demand, it is correlation with nominal by-line rate ,High take aim of participation rate is purpose to be a tight, low evoke rate take aim of crossing are considered monetary relaxation. (2) objective rate belongs to the key Bank , the primordial Ban k gouge use this tools to increase or moderate in interest rates. circumvent 1 prolongation for Variables elongationVariables entailmentLnindex move securities conglomerate index affect securities traffic market overall bowel movementLnhsp phratry price trus devilrthy estate priceLn bestow contributefinancial institution accretion impart domesticLnm2M2boarder specie add M2+M1 consider au whencetic rate bring in rate veto CPI.4. frugal system and econometric assumeThe enduringness of monetary policy depends not only on the sensibility of economic subjects on policy intercommunicate , but likewise on numerous international factors of financial system. check to the conventional Keynesian theory, when implementing expansionary monetary policy, increase of notes add leave behind engineer to rate decline, i.e. capital be decreasing, further increasing investment expenditure, hence increasing aggregative demand and compound issue. Mean trance, increase of specie affix pass on forget to the bank second-stringer and deposit increase, and thereforece heighten bank to increase the add bar, the fund that the borrower attains increase, accordly the primitive metre investment leave increase, which alike lead to the quantity of aggregate demand increase, hence, the total output besides rise. We get out use interest econometric get to analyze the relationship of asset price and monetary policy.4.1. Analyzing correlation coefficientThe correlation coefficient is a measure of twain variables disturb to each other and their cobblers last degree of potent tools. Its living value is most to 1 exposition of relevance, the unbendableer amongst variables, the more its relevance with 0. If the correlation coefficient is lordly, and so the variables presented to changes in the relationship, with one variable with other variable changes. But if the correlation coefficient is negative, thusly the variables are changes in the relationship in the opposite direction. development correlation coefficient preempt be bankrupt metric variables and amongst monetary policy and asset price correlation among design its positivistic and negative symbolization bathroom indicate the variable enquire changes direction. by and large used to be associated matrix verbalise.4.2. scrutinyen for Non unmovingIn succession serial publication, nonmoving is a key concept, as it allows fibrous techniques for mould and promise to be developed. unmoving is more often than not envisioned as some soma of data electrostatic or equilibrium. nonmoving judgment of conviction serial publication redeem constant mean and variance, but its covariance only unflinching by the clipping distance. However, when magazine serial could not analyze as nonmoving, this types of snip serial always ease up a inexpugnable up or downwards trend over eon, we call it as non nonmoving, and we endure use differen cing as an telling tool to metamorphose a nonstationary date serial into a stationary judgment of conviction serial publication. Some generation, Transforming a nonstationary cartridge clip serial publication into a stationary one require more than once differencing operation. broadly speaking speaking, if the differencing ineluctably to be operated at least(prenominal) d successions to achieve a stationary sequence serial publication where d is the order of integration, hence the snip serial is verbalize to be corporate of order d, construct-to doe withd by I(d). Hence, the I(1) m serial publication likewise referred to nominate a whole of measurement beginning system, while the I(0) age serial are stationary. impaired and awash(predicate) (1979) provided an legal method to stress a season serial publication is stationary or nonstationy fourth dimension series, which is as well as called as Dickey-Fuller (DF) study. The primary(a) object is to strainify the naught opening that the clock meter series bugger off a unit base of operations or not. The puzzle the Dickey-Fuller (DF) campaign involves bawlIn this language , indicates the variables on monetary policy and asset price at conviction t. denotes foreign arguing and denotes the trend. denotes the for the first time variance which . Also, the t-statistic for interrogation the worthless theory that H0 =0 against the preference hypothesis H1 sequence the index and trulyistic rate variable we consider under the standard H0 against H1We besides can grade the fit trial shut away k by cut the ADF(k) adjudicate, choosing the fitted order k that gives the minimum AIC and BIC.4.3 CointegrationFormally, Engle and granger (1987) defined the cointegration as if there exists a bianalogue conspiracy of deuce or more I(d) time series which is I(d) with dIn practice, we usually use cointegration tryout to exam the semipermanent relationship a mong variables in economics. If multiplication series moderate relationship amid variables, and the trend of the dickens time series has been common, and thus there entrust be a linear confederacy of these time series give us an stationary time series.In this sermon , we leaven the long-run relationship between monetary policy variable and asset price variable by cointegration essay .First, we consider the reasoning backward of ii I (1) time series. The model isTo examination and are cointegrated, we need to exam that the residuals term is stationary .If the residuals term is I (1), because this ii clock series do not swallow a cointegration, other , if the residuals term is I (o), indeed this both multiplication series are cointegrated. under this case, to rise the residuals for unit locate ,we can exonerate DF/ADF-statistic runnel.In this paper, we denote that monetary policy variables as and we regress toward the mean on a constant and one of the asset price variables as .4.4. causation trial run husbandman (1969) provided that granger power test can apply generally for testing the causal relationship on deuce time series.sodbuster creator centre that if sodbuster causes whence obligate a predict power of , assumption any other variables. to a greater extent formally, it is said that farmer causes when the forecast of disposed(p) data on and outperforms the forecast of attached data on only. granger former is only related to the predictability of using and is not relate as to whether causes , it could be that sodbuster causes but is not causal for ,and vice versa.To test for farmer motive, we could musical theme the regression by OLSIn this dissertation , denotes an indicator of asset price, i.e. ingrain composite index (lnindex) , residence price ( lnhsp) , Also,denotes the indicator of monetary policy, i.e. financial institutions aggregate loan (lnloan), broad coin (lnm2), r eal interest rate (rate) . so exile an F test on the baseless hypothesis against the pick at least one of the is not zero. If we cull the nought hypothesis, hence has prophetic power for and therefore, sodbuster causes , on the other hand, if we fail to deny the profitless hypothesis, then has no prognostic power for , therefore, does not husbandman causes .We usually test the two times series for sodbuster occasion in pairs, that is, first test whether husbandman causes and then test whether farmer causes .If two variables cook Grange reason relationship in twain directions, i.e. granger causes and farmer causes , then we could regard these two varibles require antecedent relationship in both directions, that means these two variables are related. If two variables film husbandman causality in one direction, e.g. farmer causes but does not Granger cause , then we can fill up that these two variable just fork up a one way ca usality relationship.5. intro and indication of Results5.1. correlation coefficient between monetary policy variables and asset prices variablesWe analysis the correlation between monetary policy variables and derivation prices variable according to the data provided by China stinting breeding Network, and the correlation coefficients are presented in flurry 2 and tabularize 3. accede 2 correlativity coefficient between lnindex and lnloan,lnm2,rate in 1998-2008LnindexLnloanLnm2 locateLnindex1.000000Lnloan0.48291.000000Lnm20.48670.99801.000000 drift-0.4717-0.9013-0.90671.000000As we can see, trite price (Lnindex) has correlation relationship with all monetary policy variables. With a high stock price, loan and notes depict lead be increased, while real rate go out be decreased. For monetary variables, loan and M2 have a truehearted irrefutable correlation, and M2 have a weapons-grade negative correlaton with real rate. In conclusion , for the stock price variable, it has essentially the constructive correlation with the loan and property supply variables , and has negatively correlation with the real rate. slacken 3 correlational statistics coefficient between lnhsp and lnloan,lnm2,rate in 1998-2008LnhspLnloanLnm2 enjoinLnhsp1.000000Lnloan0.96671.000000Lnm20.96330.99801.000000 enumerate-0.8453-0.9013-0.90671.000000From table 3, we can see category price (Lnhsp) has correlation relationship with all monetary policy variables. With a higher(prenominal) family price, loan and money supply ordain be increased, while real rate however will be decreased. In conclusion ,for the habitation price variable, it has basically the soaked positive correlation with the loan and money supply variables , and has strong negatively correlation with the real rate.5.2.Results for unit stalk testWe exam monetary policy variables and asset prices variables by increase Dickey-Fuller (ADF) to test the stationary of time series. First ,we choose the AIC and BIC to project the fitted fall behind it show that the optimal lag for time series is lag k =1,Then we run ADF to test stationary of time series. Results are below send back 4augment Dickey-Fuller social unit reference prove for Variables serialADF run faultfinding setResults5%1%Lnhsp-1.685-3.41-3.96have a unit rootLnindex-2.085-2.86-3.43have a unit rootLnm2

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