The Effect Of Stock Price To The Implement Mechanism Of Monetary Policy

The relationship between asset prices and monetary policy has long been a hot issue discussed by the academic community. From the micro-level, previous studies have focused largely on the role of asset prices on monetary policy transmission, and whether asset prices accurately reflect the macro-economic and other issues. From the macro-level, the existing research focuses largely on whether monetary policy should intervene in asset prices and the ability to intervene in asset prices and other issues. The perspective of existing researches tend to be more independent, but in fact, this field of researches should be an entirety, so as the financial sector, and it should be closely related to all aspects of social, economic, political and other factors. Hence, the study of finance should not only be the joint of macro and micro researches, but extend the vision to areas outside the finance. For this reason, the frontier research of modern finance tries to contact the macro-financial researches with the micro-finance researches.Our study is based and expanded on this idea. Firstly, we summarize the relevant literature on the channels of monetary policy effect the real economy and the relationship between asset prices and monetary policy. From a theoretical point of view, the former literature is to analyze the relationship between monetary policy and the real economy, and the latter literature mainly analyze the impact of asset prices on the implementation of monetary policy. It is divided into two aspects, namely, should the monetary policy intervene in asset prices and whether the monetary policy can intervene in asse prices.Then, the article do some correlation analysis on China’s monetary policy and the stock market, investigate the interest rate regulation of the price and quantity oriented monetary supply regulation and the correlation between the gross domestic product (GDP), the relationship of the consumer price index, stock price and trading volume and stock prices accurately reflect the real economy problem. For monetary policy, this chapter study shows that how the monetary policy reflects on the real economy, our study is basing on real data to examine whether they are obvious. If so, then monetary policy is anterior to the real economy changes, or changes in synchronization, or lag changes. For the stock market, trading volume has a direct impact on the real economy and the trading volume and price intrinsically linked, however, whether it is trading volume before the price change, or simultaneous changes or lag changes, and the stock price reflects to what extent the development of the real economy. All these problems are considered in this article, the second chapter studies the proposed model of the subsequent chapters and draw the final conclusion of this paper provides a preliminary realistic basis.In the third chapter, I analysis the relevant variables affect China’s stock market price, the purpose is to provides a possible answer to the question "whether the monetary policy is able to intervene in asset prices". In the next chapter, I based on the framework of the IS-LM model, this article discusses the mechanism of action of the stock market on monetary policy is that the stock market as an important investment channels for people, and people’s consumption or corporate production inputs, will absorb part of social mobility. Chapter5translates the qualitative model in chapter4into the mathematical way. This chapter establishes a general equilibrium model of four departments:residents, businesses, banks and the central bank. Discussing their respective optimization behavior, and by the establishment of commodity markets general equilibrium model, the four behavior of economic agents to the same balanced equation.The main conclusions of the article is, when rational preference and investment take a larger proportion in the stock market, the change in the price of the commodity market caused by changes in the stock price is relatively stable, the central bank’s monetary policy need not take attention to the stock market price. It’s easy to achieve control objectives frr inflation and the output gap with a certain degree of uncertainty, but not the regulation of the stock market price; When the irrational or speculate in the stock market’s composition is large, as the stock market introduction of price feedback mechanism caused by the movements of the stock price changes in the market price of goods will become less certain, the central bank’s monetary policy on inflation and the output gap in order to achieve control objectives, it’s control efforts will be greater than the market when the rational side control efforts, while the regulation of the stock market prices still have a certain degree of uncertainty. This article also find out in the research process, price regulation-interest rate policy is more obvious, bi-directional regulation of the gross domestic product (GDP) and inflation adjustment pull back the role of the role of the gross domestic product (GDP) and inflation is greater than the number of regulation and control of the money supply. Fluctuations in the rate of return on the stock market and the market index of leading trading volume fluctuations around a month. The effects of central bank’s monetary policy on stock market price index are great uncertainty, and in different time may have different effects. From the determinants of stock price, the macro-economic impact of the stock price factors mainly from the production side; the main Medium influence factors are the company’s operations and executive stock ownership. Micro-level’s big deal on the volatility of the stock price has greater explanatory power. China’s monetary policy, macroeconomic impact on China’s stock market from the level of production, and have different effects at different times of monetary policy on the stock price, so I do not recommend the stock price as the ultimate goal of monetary policy. In order to avoid the stock market rises and falls on the real economy, monetary policy often requires greater efforts in order to achieve the effect of the intervention on the stock price when the stock price is more irrational fluctuations, take some outside monetary policy measures to intervention in the stock market is also very necessary.The article’s main innovations are:Firstly, in this paper, the macro model and micro model on a framework for research, through the microscopic individual behavior established a general equilibrium model with multiple departments;Secondly, when setting up the model, the article as far as possible to put all variables into endogenous variables. So, all uncertainties are placed inside the model discussed effectively. And from the model to derive the general equilibrium model on the commodity markets, to finally arrive at the conclusion of the stock price effects of monetary policy implementation mechanisms, every step of the derivation of this article has a detailed description, as far as possible from mathematics and economics are reasonable; Finally, contact the real data and the proposed model, the period of China’s stock market irrational sentiment is located by the method of measurement. This not only reflects the correctness of our model setting ideas, but also making contact actual market data model conclusions seem more convincing.This article also has inadequateness, specifically the following two main points:First, the reality of financial assets more than the stock, and this article only consider the stock, and this article did not consider government factors, import and export factors neither, so the modeling of real-world problems is not comprehensive enough.Second, this article only for residents in the model and objective function of the corporate sector to take the specific form, and the banks and the central bank takes the general form. Therefore, we draw the final conclusion is based on the marginal nature of the function of the general form of the function on the basis of the discussion arrived, we do not give specific analytical solution, to apply econometric model needs further assumptions on the function of the general form of the model in this article, need to give the concrete form.However, the shortcomings above are also the focus of future research in this article.