An Empirical Study On The Effect Of China's Monetary Policy On Stock Market

In this thesis, we mainly study the effect of China's monetary policy on stock market in the theoretical and empirical way. With the rapid development of China's stock market, the stock market has become an important channel for financing. More and more people are involved in the stock market and the relation between the stock prices and real economic activity become more and more close. Chinese government and policies makers have pay close attention to the relationship between the monetary policy and the stock market. So, studying the relationship between the monetary policy and the stock market has practical meanings.Firstly, we introduce some important research outcomes in the finance and economics study and show the effect of money supply and interest rates on the stock market. And then we compare and summarize the main study approaches in this field.Secondly, we empirically study the relationship between the monetary policy and the stock market. In the short-run analyses, we use the event study approach examine the effect of interest rate policy and deposit reserve policy on the stock market. In the long-run analyses, we use the VAR (Vector Auto-regression) model examine the long-run impact of money supply and interest rate on the stock market.Finally, we present the conclusions and discuss the impact of the reform of separately the capital stock and equity capital on the stock market. Then we put forward several suggestions for the reform of China's monetary policy and stock market: (1) make the interest rates policy as the main method of China's monetary policy; (2) Speed up the process of market-oriented interest rates reform; (3) Strengthen the supervision; (4) Improve and regulate the stock market development.