Relationship Between Money Supply And Stock Market

With the rapid development of China's stock market, the market value of China's stock market and trading volume has been tremendous in recently years, central People's Bank as the most important macro-economic control department uses the monetary policy to adjust money supply and interest rate,it will have tremendous impact on the development of the Chinese stock markets index. According to the fact above, it is necessary to analyze the relationship of currency and stock markets theoretically and practically to provide a useful reference and suggestion for the formulation of monetary policy by monetary authorities.This text is divided into four parts:PartⅠmainly study the theoretical relationship between the stock market index and money supply, then the interaction machanism between the stock market index and money supply is concluded.PartⅡcarries on the empirical research to the inter dynamic relationship between the stock market and the monetary supply with the quantitative method mainly. It takes a broad view of the scientific findings of learning sphere until now. Though the empirical method is used, but the false regression is not considered, so the majority of conclusions drawn was not correct. In the view of this , the author using ADF unit root test, Johansen co-integration test are applied to study the interrelationship between money supply and stock price index.In the last part ,The research combines theory with practice study the relevant theoretical system and relationship, interaction in short and long-term relationship, causality and mutual influence ability. Then the results of positive analysis and the economic significance are summarized , then the trend of future policy as well as the possibility of impact on the stock market and specific proposals are put forward.