Research on Chinese Monetary Policy: Targets Extend to Asset Prices

This paper attempts to measure the impact of monetary policy on the asset prices. We apply a lag augmented vector autoregression (LA-VAR) to investigate the impact of monetary policy on asset prices with an empirical study of Chinese monetary policy from 1998 to 2008. The result shows that the adjustment of interest rate follows the stock market change which proved to be the granger reason of interest rate. This indictates that Chinese monetary policy refers to asset prices, its targeting to asset prices supports that proper monetary policy can affect asset prices and reduce the fluctuates of asset prices.