Abstract: In this paper, We use the method of predictive variance decomposition based on DAG to indentify the causal relationship between variables in the same period, and systematically explore the regulatory effect of different monetary policies on asset prices such as stock price, exchange rate and house price, which is the basis for the choice of monetary policy for different asset prices. The results show that: asset price volatility such as stock prices, exchange rates and house prices are mainly driven by their own inertia; the effect of monetary policy on stock price is very limited, and the regulation of exchange rate requires the combination and coordination of different monetary policy, while interest rate should be the main monetary policy tool to control the fluctuation of real estate price; compared with other regulatory tools, interest rate has an independent advantage in asset price regulation. While actively promoting the transformation of the monetary policy regulatory framework from a quantitative-based one to a price-based one, we should further unblock the transmission channels of monetary policy in asset price regulation, adopt structural monetary policies according to the specific characteristics of asset prices, and give full play to the positive role of the combination of different monetary policy and the coordination of monetary policy and macroprudential policy in stabilizing asset price fluctuations.

Keywords: Asset price; Monetary policy; Forecast variance decomposition; Directed acyclic graph