A Study On The Relationship Between The Monetary Policy And The Fluctuation Of Stock Market In China

In recent years, Chinese stock market has developed rapidly, however, it has fluctuated significantly. It has impacted the stability of finance and the development of economy greatly. Although the stock market has positive effect on monetary policy transmission, it weakens the effect of monetary policy to some extent. Monetary authorities have made use of monetary policy methods to relieve this situation, but the result is not satisfactory. People have begun to doubt the effectiveness of monetary policy.This article has proved the relationship between the monetary policy and the fluctuation of stock market in the aspects of theory and practice. In the beginning, it has a brief summary of monetary policy, including it's aims, tools and transmission mechanism, besides I analyze the reasons of fluctuation of the stock market from fundamentals and non-fundamentals. Then in theory I discuss how monetary policy and stock market affect each other, and make detailed explanation of how monetary policy transmits through stock market. In the next, in order to have a more clear description of their relationship, I make use of our country's latest dates and choose some representative variables and econometrics model to do empirical research between monetary policy and the fluctuation of stock market. In this process, it refers to some methods, such as the cointegration test, the vector error correction model (VECM), the impulse responses function etc. The content of empirical analysis involves the influence of the fluctuation of stock market on currency demand, the speed of currency circulation and the influence of interest rate and currency supply on stock market.According to empirical test, I make a conclusion that in our country the fluctuation stock market has influenced on monetary policy in both short time and long time. The fluctuation of stock market changes the speed of currency circulation at the opposite direction. The influence of interest rate and Ml on stock market is the same as the description in theory, however, there are some kinds of lag in time. There are some opposite result in M2 compared with theory. Finally, after combining our country's situation in reality, I come up with some suggestions that monetary authorities should pay attention to the fluctuation of stock market when drawing up monetary policy; It is very important to smooth the channel of monetary policy transmission; Standardize the stock market and enhance the quality and operational efficiency of stock market.