The Study On Exchange Rate Transmission Mechanism Of Monetary Policy And The Influence Of Stock Market On Its

The researches on the monetary policy's intermediate targets are the focus that the central bank in the world and research institutes put themselves into. Anyway, the reform of monetary policy's intermediate targets of our country is in the transition—the money quantity target, money supply, will be translated into the money price target, interest rate and exchange rate, the formation of the RMB exchange rate is increasingly market-oriented and Chinese economy has an increasingly close ties with outside economy, so exchange rate will become a new monetary policy's intermediate target of our country.Based on the above considerations, the paper try to explain the effectiveness of RMB exchange rate transmission of monetary policy through empirical analysis on the classical theory of Western economic and the Chinese actual situation. In addition, the paper also studies how the stock market impacts the exchange rate transmission mechanism.Section 1 includes the background, research framework, as well as the innovation and points for future improvement, giving the research background and the path to the readers.Section 2 introduces the exchange rate transmission mechanism of monetary policy from a theoretical point of view based on the international financial theory.Section 3 explains the relationship between exchange rates and stock prices based on the Flow-oriented models of exchange rate determination and Stock-oriented models of exchange ratesSection 4 is the empirical part in this paper. Using the quarterly data of china from January, 2000 to December, 2007, we study the effectiveness of exchange rate transmission of monetary policy and the impact of stock market on exchange rate. Through this empirical analysis, some evidence can be drawn:1,Changes in money supply have an impact on the exchange rate, but the impact is weak because there is the exchange rates regime in china. In addition, the real effective exchange rate has an influence on the money supply, so there is an impact on the monetary policy independence.2,The nominal exchange rate movements in the short term almost no impact on GDP and in the long term impact on GDP increasingly strong, but the real effective exchange rate no impact on GDP.3,There is internal relationship between RMB exchange rate and stock index. The relationship between nominal exchange rate and stock index correspond with the Flow-oriented models of exchange rate determination. However, the relationship between the real effective exchange rate and stock index is ambiguous.4,In considering the impact of the stock market, the influence of nominal exchange rate on GDP has lag and the influence of real effective exchange rate on GDP is no change.Based on these analyses, the final paper try to make some suggestions in the operation of monetary policy.