A Research On The Effects Stock Market Transmiting Monetary Policy

Generally speaking, stock market monetary policy transmission mechanism is divided into two parts: the first, the implementation of monetary policy affects the future earnings of stock, which will affect stock price; the second, on one hand stock price changes cause investors to adjust the financial assets and thus affect private consumption, on the other hand stock price changes will also change the company's cost of funds and thus affect investment. Consumption and investment couse changes in output.This article uses some econometric methods to analyses the effects that stock market transmits monetary policy, based on former analysing framework, then make theoretical analysis and gets conclusion.Test show that the monetary policy transmission between money market and stock market is fast: money market and capital market flows mainly determined by money supply and stock prices, while stock price primarily determined by interbank lending volume and interest rate, various messages transimits between money market and stock market is rapid. Examinations showed weak consumption effect and some substitution effects, wealth effect generated by the main groups whose wealth limited grow or even negative grow, thus weakening the wealth effect, while stock market's fake boom which absorbs funds for consumption will cause further weakening of consumer effects. Testing also revealed that the investment effect is positive, which is consistent with theoretical expectations, for Tobin q theory, if money supply increases, stock prices will rise, and companies are more willing to issue stock, for balance sheet theory, the net will increase which will cause investment increased. However, due to China's stock market prices distorting, resource allocation effects can not be established.This text recognized that the central bank should continue to put the money supply as an important macroeconomic indicator while the interest rate flexibility increases, the central bank should make a schedual for market interest rate becoming an intermediate target of monetary policy. Supervision should be strengthening; stock market should be improved and expanded. In order to promote the consumption effect, stock market should strengthen penalties against non-compliance, improve the exit mechanism, adjust the distribution pattern, strengthen information disclosured, and protect the interests of small investors. In order to promote the consumption effect, stock market should improve stock price formation mechanism, so that Tobin's q will be a more stable indicator to reflect the acquisition cost of funds and change the absolute dependence on banks to increase the the proportion of equity financing, and promote the allocating effects of stock market effect.