The Impact Of Monetary Policy And Stock Market Study

Since the new millennium, with the rapid development of China's stock market, at the same time, residents and enterprise's will on stock investment has strengthened, and the market value of China's stock market and trading volume has been considerable, so the incremental demand on currency can not be ignored. As an important macro-economic control department, the central People's Bank frequently uses the monetary policy to adjust interest rate and deposit reserve ratio. Although each monetary policy is not adjusted for the stock market, it will have great impact on the development of the emerging Chinese stock markets. Based on the above, it is necessary to analyze the relationship between China's currency and stock markets theoretically and practically to provide a useful reference and support for the formulation of monetary policy by monetary authorities.This article summed up the relevant research results on the development of the stock market and money supply relationship in the academic community, based on which interaction mechanism between the development of the stock market and money supply is concluded. The each adjustment to monetary policy will have great impact on the stock market, which will have an influence on monetary supply through the wealth effect, the effect of the transaction, the portfolio effect of substitution effects. Based on the analysis above and the actual situation in china, it is found that the stock market exerts a great impact on china's monetary demand just through a comprehensive action of the effectiveness above. With the further development of the stock market, China's demand for monetary policy is facing new challenges. The central bank should not only concern with the currency needs of the real economy, but also with the demand on money from visual economy, such as stock market to make a balance. Thus, the monetary policy can be implemented effectively and money supply plan can be established, which will play an important role in China's sustained economic growth.In order to more objectively evaluate the relationship between China's stock market and currency demand, the third chapter will analyze the short-term announcement effect on stock market brought by the changes of monetary police through calculating the stock excess-proceeds. The fourth chapter adopts four measuring testing methods: co-integration relation test shows that with the control of other relevant factors, there is a distinct long-term co-integration relationship between the developing size of the Chinese stock market and the demand for money; Granger causality test and analysis shows that there is a cause and effect relationship between the stock market and money supply; Error correction model shows that the size changes in the stock market has been able to produce medium and long-term dynamics influences on the demand for money demand. But the present influence is weak. but also affect the current very weak. The empirical results also show that the Chinese stock market to the money supply more than short-term impact of long-term impact should be weak. The empirical results show that the short-term influence on the money supply from china's stock market is much weaker than the long-term influence.