Empirical Research About The Effect Of Monetary Policy Transmission Through The Stock Market In China

Since the 1990s, The globalization and integration of capital markets, The trend of mixed operations in the financial industry is increasing. The capital markets, as the market mechanisms in the allocation of resources, property transactions, risk management and company supervision, led the financial systems to be undergoing deeply changes. It impacts on the development of economies and other economic areas. Financial innovations change the structures of and the total financial assets in many countries, also affect the structures of financial assets held by the corporations, and change the residents' behaviors of investment, savings and consumptions.From 1991 to date, the stock's market in China has developed rapidly. By the end of January 2008, the number of the listed companies has reached 1566. The number of securities accounts is already 140,200 thousand. The shares of all stock market's value in the GDP are 136.45%. But the circulating stock market's value is only 34.2% of GDP, which shows that the securitization in China's economy was still at a relatively low level. Since the 2006, split share structure reforms have been completed; Stock's market in China has entered a new era. The functions of stock market as "barometer" of China's economy are being gradually strengthened. The impact on the operation of Macro-economic entities appears gradually. The stock market has become an important part of monetary policy in the course of the implementation, and has increasingly become one of the important channels in the monetary policy transmission mechanism. Analyses the functions of the stock market in the course of monetary policy transmission have a major practical and theoretical significance to improve the level of the central bank's macro-control and enhance efficiencies of the monetary policy transmission. Study on how the stock market transfers the monetary policy is not only to solve some immediate problems, but also to conform to the laws of economic development to achieve the long-term stable development of economic and financial stability.In order to achieve the purpose of the study and solve practical problems, This paper study more comprehensively and deeply on the effects of China's stock market conduction of monetary policy and its impact factors, focus on the roles the stock market has played in the mechanism that the monetary policy impacts real economy. The order of the paper as follows: Firstly, the paper introduces the channel of the rate and money; following the paper demonstrates that stock market impacts consumptions and investments through wealth effect and Q effect, and finally influences the real economy. Finally, the paper draws conclusions and recommends appropriate policies.Specifically, this paper is divided into six chapters, as a total of a tight system.Chapter I is the Introduction. The paper mainly discusses the practical significance of this topic in the new circumstances of China's stock market development, and sums systematically up the theories on this topic and its main conclusions, and shows briefly the research methods in this paper and the framework of the paper. Chapter II discusses different channels that the monetary policy influences the stock market and the stock market affects the real economy from theories. Monetary policy affects the stock market mainly through the channels of interest rates, credit channels, and the money supply; the stock market affect consumption and investment, and finally influences the real economy mainly through the wealth effect, the effect of mobile and Q effects, expectation effects. Finally, this chapter sums up the framework of this paper.Chapter III introduces systematically the overview of the developments of the China's stock market, in order to understand the conclusions in the following chapter. The scale of China's stock market expands gradually, the proportion of the amount of the stock market financing in the amount of social investment increases gradually. The industry structure and regional distribution structure of the listed company's covers a wide range, the function of the stock market as the national economy "barometer" has been strengthened gradually.Chapter IV makes the empirical analysis on the money policy impacts on the stock market through the channel of the rate and the money supply respectively. The results showed that in China, the two channels are not long-term stable relationships. However, in the certain term, the two channel impacts the stock market very clearly. Finally, this part analysis the reasons that the money policy influences the stock market unclearly.Chapter V tests the effect of consumption and investment in China's stock market. From the results, we find that the effect of consumption and investment are not very clearly. However, compared with the year before, there is a larger increase, which shows that the impact of the stock market on the real economy is more and more important.Chapter VI makes recommendations to enhance effects of the transmission of the money policy through the stock market. This part discusses mainly from the two aspects that how to strength the effect of monetary policy on the stock markets and stock market on the real economy.