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1、(研究领域：宏观经济学)Asset price, macroeconomic variables and monetary shock Cointegration analysis of Chinese Market This work was supported by DAAD ( German Academic Exchange Service) and CSC (Chinese Scholarship Council), whose financial support for my PhD study is gratefully acknowledged. I would like to
2、 thank Prof.Dr. Gerhard Illing at University of Munich for his supervision and advices.Ying Deng 邓 瑛Department of Economics, University of Munich, GermanyXinhua School of Finance and Insurance, Zhongnan University of Economics and Law, ChinaAbstract: In this paper, I investigate whether the current
3、economic activities are cointegrated with the stock price in China on the basis of the response of stock prices to macroeconomic fluctuations. I set up a hypothesis and theoretical model using the vector error correction model. This cointegration relation indicates direct long-run and equilibrium re
4、lations between asset price and four macroeconomic variables in China, i.e. industrial production, consumption expenditure, monetary supply (M1) and consumer price index. Together with the result of Granger causality test, it also demonstrates that stock price index and consumption index as well as
5、the monetary supply adjust to the previous equilibrium error. I also give an explanation from the point of institutional deficiencies in Chinese economic and financial system, and present some policy implications from the cointegration analysis, including deepening the reform of financial system and
6、 making a low long-run inflation objective inclusive asset price as a new nominal anchor.Keywords: asset price, macroeconomic variables, cointegration, monetary policy1. IntroductionThe relationship between stock prices and macroeconomic variables has been predominantly investigated assuming that on
7、 one hand, macroeconomic fluctuations are influential on stock prices through their effect on future cash flows and the rate at which they are discounted (Chen et al.1986; Geske and Roll 1983; Fama 1981), and on the other hand stock prices are influential on macro economy through conduction channels
8、 of monetary policy, such as wealth effect, Q effect, liquidity effect etc.A number of macroeconomic factors have been used to represent risk in mature stock markets. Earlier studies were mainly motivated by the Arbitrage Pricing Theory (Ross 1976), and could be perceived as global asset pricing mod
9、els (Ferson and Harvey 1998). Some of the popular factors used in these models were industrial production, inflation, interest rates, and oil prices (Hamao 1998; Harris and Opler 1990). The logic and methodologies used, therefore, are based on the understanding that expected returns are dependent up
10、on these risk factors. The direction of the relationship is thus assumed to be unidirectional, and from macroeconomic variables to stock returns.Dynamic linkages between stock markets and macroeconomic variables are equally important, which turn to be a bi-directional relationship, or cointegrationa
11、l relationship, where stock price also plays an important role in transmitting macroeconomic policy, such as monetary policy to the real economy and influences the macroeconomic variables. Fluctuations of the stock market, which are influenced by monetary policy, have important impacts on the aggreg
12、ate economy. Transmission mechanisms involving the stock market are of four types: 1) Tobins Q effects on investment, 2) firm balance-sheet effects, 3) household wealth effects on consumption and 4) household liquidity effects Mishkin, Federic S.(2001), “The Transmission Mechanism and the Role of As
13、set Prices in Monetary Policy”, NBER, Working Paper, No.8617.However, such linkages have been investigated only recently and extensively for developed markets (Mukherjee and Naka 1995; Lee 1992). Dynamic linkages in the emerging markets of less developed countries, such as China have been ignored, w
14、ith a few exceptions. Such relationship is considerable, however, mainly due to the overwhelming influence of governments in economic activity. Stock markets have been established only recently, the volume of trade is low, and company-specific information is not always timely or of high quality. The
15、refore, stock markets are inclined to influence from economic policy. The foucus of this paper is on investigating the cointegration relationship between the stock price and some macroeconmic variables in China, with a comparison to a U.S.A. In order to establish the causal ordering, Granger causali
16、ty tests and VECM model are employed where, for a long-term dynamic equilibrium between asset price and macroeconomic variables, a corrected cointegration equation will be set up. And as a discussion for the result of cointegration analysis, I will finally present some important reasons from the poi
17、nt of institutional deficiencies of Chinese economic and financial system and give some policy implications.2. Literature ReviewDynamic general-equilibrium model provides a simple framework within which one can examine the impact of fundamentals on a broad range of economic variables, including the
18、market value of firms, investment, output, and the capital stock. The framework adopted here differs from most macroeconomic analyses by adopting preferences that are not separable across states of nature; this specification (non-expected utility), following Epstein and Zin (1989) and Weil (1990), a
19、llows a separation between risk aversion and intertemporal substitution and hence can better match asset-pricing regularities. The specification and solution of the model with these preferences may be unfamiliar to some and of independent interest. Therefore, the key insights provided by the model r
20、elate to the general-equilibrium determination of consumption, investment, and dividends.2.1 Consumption-based Asset PricingConsumer PreferencesThe representative consumers preferences (U) are defined recursively by Michael Kiley(2004) as follows: (2.1)where 0, 01, and E is the mathematical expectat
21、ions operator, C represents consumption, and the remaining symbols represent parameters of the utility function Michael T. Kiley: “Stock Price and Fundanmentals: A Macroeconomic Perspective”, Journal of Business, 2004, vol77, No.4. This recursive definition of preferences allows for a separation of
22、the intertemporal elasticity of substitution (which equals 1 in equation (2.1) and the coefficient of relative risk aversion () as in Epstein and Zin(1989) and Weil(1990). When equals 1, the recursion in equation (2.1) collapses to the standard expected utility case, in which the coefficient of rela
23、tive risk aversion equals the inverse of the intertemporal elasticity of substitution (i.e.,1);when differs from 1, the recursion implies that preferences are not separable across states and the coefficient of relative risk aversion differs from the inverse of the intertemporal elasticity of substit
24、ution. Notably, greater than 1 implies that consumers are more risk averse than under expected utility.On the influence on consumption by stock price, the study on wealth effect has been taken on at least for 30 years. Tests of the consumption CAPM using household-level data have shown that the cons
25、umption of stockholders is more highly correlated with excess returns on the stock market than the consumption of non-stockholders, which suggests at least some role for the direct channel. Mankiw and Zeldes (1991) discover this relationship, using annual observations on food consumption from the PS
26、ID. Attanasio, Banks, and Tanner (1998) confirmed the result for a broader measure of consumption, observed at a quarterly frequency, from the UK Family Expenditure Survey, and Vissing-Jrgensen (1999) and Brav, Constantinides, and Geczy (1999)produced similar findings using the CE. Moreover, Andreas
27、 Gunnarsson and Tobias Lindqvist(2000) made an empirical study on the influence of stock price and housing price on private consumption as well as inflation Andreas Gunnarsson and Tobias Lindqvist(2000), “The Role of Asset Prices in Monetary Policy? A Study in How Central Banks Should Pay Attention
28、to Asset Prices in Monetary Policy.”, finding that stock price is positive relative with private consumption with a lag of 3 to 6 months, and the past stock price plays a more important role than the current price. Lettau, Martin, Ludvigson, Sydney and Charles Steindel(2001) found an obvious wealth
29、effect in USA, but were uncertain about the value of wealth effect. Charles Goodhart and Boris Hofmann (2001) regarded that Charles Goodhart and Boris Hofmann (2001), “Asset Prices, Financial Conditions and the Transmission of Monetary Policy”, paper prepared fro the conference on “Asset prices, exc
30、hange rates, and monetary policy”, Stanford University, March 23, 2001., value of wealth effect depends on the percentage of financial asset in the total wealth hold by private sector. The historic data shows that equity asset has gained an increasing percentage in recent years.2.2 Production-based
31、Asset PricingA production technology defines an “investment return,” the (stochastic) rate of returnthat results from investing a little more today and then investing a little less tomorrow.With a constant return to scale production function, the investment return should equal the stock return, data
32、 point for data point. The major result is that investment returns functions only of investment data are highly correlated with stock returns, which is an empirical result for developed countries. The prediction is essentially a first-differenced version of the Q theory of investment.The stock retur
33、n is pretty much the change in stock price or Q, and the investment return is pretty much the change in investment/capital ratio. Thus, the finding is essentially a first-differenced version of the Q theory prediction that investment should be high when stock prices are high. This view bore up well
34、even through the gyrations of the late 1990s.One central argument of James Tobins seminal 1969 Journal of Money, Credit and Banking paper was that “financial policies” can play a crucial role in altering what later became known as Tobins q, the market value of a firms assets relative to their replac
35、ement costs. Tobin emphasized that, in particular, monetary policy can change this ratio. This 1969 JMCB paper together with another of his contributions (Tobin 1978) became a key element in the formulation and understanding of the stock market channel of monetary policy transmission.When internet s
36、tock prices were high, investment in internet technology boomed. Pastor and Veronesi (2004) show how the same sort of idea can account for the boom in internet IPOs as internet stock prices rose. The formation of new firms responds to market prices much as does investment by old firms.The Q theory a
37、lso says that investment should be high when expected returns (the costof capital) are low, because stock prices are high in such times. Zhang (2004) uses the Q theory to “explain” many cross-sectional asset pricing anomalies. Firms with high prices (low expected returns or cost of capital) will inv
38、est more, issue more stock, and go public; firms with low prices (high expected returns) will repurchase stock. We see the events, followed by low or high returns, which constitutes the “anomaly.” Mertz and Yashiv (2005) extended the Q theory to include adjustment costs to labor as well as to capita
39、l. Hiring lots of employees takes time and effort, and gets in the way of production and investment. This fact means that gross labor flows and their interaction with investment should also enter into the Q-theory prediction for stock prices and stock returns.2.3 Monetary Frictions/Monetary Shocks a
40、nd Asset PriceMishkin presented the following four channels as how stock market conducts monetary shock through asset price into the real economy Mishkin, Federic S.(2001), “The Transmission Mechanism and the Role of Asset Prices in Monetary Policy”, NBER, Working Paper, No.8617: (1) Stock Market Ef
41、fects on Investment.(2) Firm Balance-Sheet effects(3) Household Liquidity EffectsLikelihood of Financial Distress Where indicates a rise in consumer durable expenditure and a rise in residential housing spending.(4) Household Wealth EffectsWhere and indicate household wealth and consumption rises. R
42、esearch has found this transmission mechanism to be quite strong in the Unite State, but the size of the wealth effect is still controversial.In macroeconomics, monetary shocks and monetary frictions are considered by many to be an essential ingredient of business cycles. They should certainly matte
43、r at least for bond risk premia. (See Piazzesi 2005 for the state of the art on this question.) Coming from the other direction, there is now a lot of evidence for “liquidity” effects in bond and stock markets (see Cochrane 2005 for a review), and perhaps both sortsof frictions are related.Recent wo
44、rk on the relationship between stock returns and macroeconomic variables has employed techniques, such as ADF, Johansen Cointegration Test, VAR and VECM, which take into account dynamic linkages. Lee (1992) investigated causal relations and dynamic interactions among asset returns, real activity, an
45、d inflation in the post-war United States. Lees main results indicate that real stock returns help explain movements in real activity. Lees findings are compatible with Famas(1990) explanation for negative stock return-inflation relationship. Martin Lettau and Sydney Ludvigson(2001) using a cointegr
46、ated VAR method, concluded that fluctuations in consumption-wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate Martin Lettau and Sydney Ludvigson, “Consumption, Aggregate Wealth, and Expected Stock Returns”, The Journal of Finance, Vol.LVI, No.
47、3, June 2001. Fabio Panetta (2002) analysis the stability of the relation between Italian equity returns and macroeconomic factors using the methodology suggested by Dimson and Marsh(1983), showing that the instability is really a serious problem. The sensitivities to the macroeconomic variables are
48、 highly unstable for both individual securities and portfolios Fabio Panetta, “ The Stability of the Relation between the Stock Market and Macroeconomic Forces”, Economic Notes by Banca Monte dei Paschi di Siena SpA, vol 31, no-3-2002, pp.417-450. In recently years, research on such a cointegration
49、relation in developing countries such as China has also come up. Research work of Yi Gang and Wang Zhao (2002) found that quantity of currency and inflation depends not only on the price of commodities and services, but also on the stock market. Sun Huayu and Ma Yue(2003) use a recursive VAR method to analylize the relation between stock price and GDP as well as CPI, findi
