Should Monetary Policy Focus on Asset Prices:from the Perspective of Monetary Stability

Currency stability is a concept developing constantly wit h the expansion of the extension of the monetary transaction.The scale of the asset transaction can make asset price volatility seriously affect the monetary stability and social welfare;therefore,monetary stability should include asset price stability.By making use of the quarterly and monthly data of China from 1998 to 2009,and through such methods as cointegration,estimated error correction and variance analysis,this study finds out that there is a linkage between the asset prices and the present value and expected value of the traditional indicators of inflation,as well as a significant relationship of quantity explanation between it and the monetary stock in economic operation;asset prices are influencing the effects of monetary policy through economic factors affecting consumption,investment and so on.It is not the case that monetary policy has nothing to do with maintaining the currency stability,including asset prices.Experiences prove that asset prices usually make positive response towards the adjustment of monetary policy.Therefore,monetary stability index should be based on the traditional indicators of inflation and asset prices comprehensively,i.e.the making of monetary policy should,in accordance with the transmission mechanism of asset prices,analyzes accurately the relationship between asset prices and monetary intermediate goals,so as to adopt the policy tools accurately.