On the Effect of Price Changing of Assets on the Effectiveness and Efficiency of Monetary Policy

The expansion of non-monetary financial assets and it's price changing have important influence on the effectiveness and efficiency of monetary policy. The effectiveness of monetary policy depends on three aspects: 1. Whether money could affect economic output,; 2. Whether there is a stable relationship between output, price and money; 3. Whether monetary authority could control money. This paper discusses the influence on monetary policy by assets price changing from these three conditions. Firstly, assets price changing breaks the stable relationship between money and price. Secondly, assets price changing breaks the stable relationship between output and money. Lastly, assets price changing weakens the power of controling money by money authority. After showing the influence of assets price changing on the effectiveness of monetary policy, the paper details the countermeasures by central banks to resist such influence.