A Study Of The Influence On Money Supply To Investment And Consumption

Money supply, as intermediate target of monetary policy, influenced investment & consume mainly by the way of banking system. However, coupled with continuous expansion of China's stock market, more and more stocks are handed by companies and individuals. As a result, this would effect their conduction of investment & consume. Therefore, it is an issue which is worth to discuss seriously that whether increase of China's money supply could influence investment & consume via stoke market.In March 17th of 2001, China has implemented Publication Approval System of Stock Issuance; in June 12th, State Council issued Management of Reducing State-owned Shares & Financing Social Security Temporal Bill. All of these effects stock market seriously. So, this thesis analysis effect of China's money supply to investment & consume via stock market by the way of empirical study, and the monthly data is from 2001-2010.First of all, it analyzes effect theory of money supply to investment & consume via stock market systemicly. Based on theory, the impact ways are divided into two stages:impact of the money supply on the stock market,and impact of stock market on investment and consumption.Then, it makes empirical test on interaction of variables in the tow stages, and gets a result that there exists long term co-integration relationships between M0 & stock price, M1 & stock price and M2 & stock price, and exists Granger causality between M1 & stock price and M2 & stock price. And it also comes out that China's stock market impacts investment but doesn't impact consume.Based on this evidence, and combined with China's economic development situation, the thesis analysis of the reasons for the establishment of the empirical conclusions.Finally, it proposes that government should enhance the impact capability of money supply on stock market, and enhance the impact capability of stock market on investment & consume.The former's recommendations include: strengthening the linkages between currency market and stock market, and enhancing the function ability of the stock market to absorb funds. The latter's recommendations include: expanding the scale of the China's stock market, standardizing corporate governance structure, and striving to protect the interests of small shareholders.