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The Empirical Analysis Of The Effect Of Monetary Policy To The Stock Price

Posted on:2007-12-25Degree:MasterType:Thesis
Country:ChinaCandidate:Q CaiFull Text:PDF
GTID:2179360185457521Subject:Quantitative Economics
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Since the historical high 2245 created by the SSE COMPOSITE INDEX in June, 2001, our national stock market has experienced the big bear market for more than 4 years, reaching the lowest 1013 points in June, 2005 and the circulating market value dropping from the peak 1.8866 trillion Yuan to below 1 trillion Yuan, which made the general investors lose lots of money. Facing the listless stock market, many domestic scholars hold that certain efforts must be made to prevent the stock value from depreciation. For this purpose, our country took a series of measures like deducting the dividend tax, providing the stock traders re-loans, etc. but the fading stock market remained the same. Some scholars suggest loosing the current sound monetary policy, using the monetary transmission theory in western economics to analyze the relationship between money supply and the security market, in order to find a solution to this problem. The monetary transmission theory holds that when the money supply increases, the interest rate will decrease; the investment will increase and profit will rise; the public will use the unused money to buy shares and bonds; when the price of shares and bonds rise up, reverse situation will happen. However, it is well known that from 2001 to 2005 our country's money supply continuously increased, stock price decreased all the way, and under national controlling the interest rate had decreased many times, but the stock price was hardly affected, which means the failure of our monetary transmission mechanism and the low efficiency of transmitting the monetary policy in stock market.First of all, this thesis reviews the related theories and literatures of monetary transmission theory.To examine the effect of transmission mechanism of monetary policy, the relationship between money supply and price fluctuation of stock needs to be firstly analyzed. According to the economics theory, the change in money supply will affect the stock price through a certain transmission mechanism. Suppose the central bank will purchase or sell bonds to adjust bank reserve and balance the money supply, it will at first affect government's bonds'market and then the corporate bonds and common stock market and finally affect the physical market. It means that the change in money supply will initially affect the financial market and then the physical market---firstly the change in money supply and then the change in stock price. On the other hand, stock price change...
Keywords/Search Tags:Empirical
PDF Full Text Request
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