The Impact of Accidental Shocks on Asset Prices from the Perspective of Financial Industry Opening

Abstract

This paper introduces open financial intermediaries into a multi-sector dynamic stochastic general equilibrium (DSGE) model of a small open economy, and studies the path and mechanism of the transmission of occasional shocks from one sector to other sectors, including monetary policy shocks, financing cost shocks, foreign capital withdrawal probability shocks, and foreign capital scale shocks, as well as the impact of financial openness and capital procyclical effects on this. The study found that compared with a single price-based monetary policy, the Tobin tax is more effective in cross-border capital flows. Instead of improving cross-border capital flows, a single monetary policy will have an adverse impact on the capital market. When the overseas situation is unstable, it is necessary for the government to use fiscal and monetary means to maintain short-term economic stability and a reasonable structure of household balance sheets. When foreign capital moves on a large scale, the investment structure will change significantly, but in the long run, capital prices will return to a reasonable level after a significant increase.