The Relationship Between Stock Price Index And Macroeconomy In China

The relationship between stock market and economic growth is one of the most controversial issues in the economic field. The current research also focuses on the issue that whether the stock price can reflect the status quo of national economic growth. In this paper, we study the relationship between the stock price index and economic development, savings and investments to, in some way, recognize the impact of stock market on the national economic development. Further more, we employ "cointegration test" on the latest data and make a conclusion that there is little correlation between the stock price index in China and macroeconomy, and the stock price index hasn't served as a reliable barometer. Finally, we propose some suggestion on how to make the stock market and national economic growth interact more positively.The present paper is organized as six parts. In section 1, we discuss the meaning of our research, our research method, advantages and disadvantages of relative work in recent years. The basic theory and the mechanism of the interaction between the macroeconomic growth and stock price will be discussed in section 2. Sections 3 analyze the status quo of the index trend and macroeconomy. Concrete examples about the relationship between the stock price and macroeconomy will be given in section 4. We analyze the problem from three aspects as follows: (1) the definition of variable and the choice of sample data. (2) Model design. (3) Relationship between stock price index and economic growth, savings and investments. And then we calculate the data with cointegration test. Section 5 proposes some suggestion and in section 6 conclusion will be made and problems to be discussed in future will be presented.There are four innovations in this paper: firstly, in order to focus our research on the development of matured stock market, we use the data in 2007 as our sample interval, which makes the results of the model more convincing. Secondly, taking the potential non-linear relationship among the various of indexes fully into account, we employ cointegration test instead of using the multiple variables linear regression method to study stock price index and macroeconomy. Consequently, the possible "Pseudo-return" phenomena do not arise. Thirdly, we analyze the issue in the light of the environment of stock market resolution in these recent years, and bring up several new suggestions in terms of policies. Finally, we pay more attention to discuss savings and investments, and study the mutual relationship among stock price index, investment and savings more comprehensively instead of fully comparing the stock index with the GDP, which has been soundly discussed by predecessors.