An Empirical Analysis Of The Effect Of Eposit Reserve Rate Adjustment On Stock Market In China

From 2007 to 2008, the Chinese stock market experienced an unprecedented shock. Shanghai Composite Index jumped from 2715.72 points at the beginning of the 2007 year, all the way to 6092.06 points in mid-2007, the highest point in history. After that it fell to 1820.81 points at the end of 2008. During the same time, China's economy was also facing many problems like expansion of investment demand, the rapid expansion of the scale of monetary credit, the overall increase in asset prices, increasing inflationary pressures, economic overheating characteristics and so on. In order to alleviate the economic pressure, the central bank frequently adjusted the deposit reserve ratio. From 2007 to June 2008 period, it had adjusted the statutory deposit reserve ratio for 14 times. China's deposit reserve rate had been raised from 9% to 17.5%, close to the highest level in history. Then, as the global economic crisis happened, our country's economics was facing downturn. People's Bank of China lowered the deposit reserve ratio down to 14.5% at the end of 2008. From the fact that our government focused on the adjustment of the deposit reserve ratio so often we could get the following conclusion: on one hand, it reflected the urgency of the macro-economic situation of our country; on the other hand it showed that the People's Bank of China put the deposit reserve policy as a major one of the tools of monetary policy in the role of economic regulation.As a result of rapid economic growth in China's capital markets, researching the relationship between the deposit reserve ratio and capital market is extremely meaningful. In this paper, based on the theory of monetary policy transmission mechanism, we researched the deposit reserve ratio in China's stock market and conducted an empirical study in the use of policy intervention model. The data were including Shanghai Composite Index, Shanghai Real Estate Index, Shenzhen Empirical Analysis of the financial index during the adjust time of the deposit reserve ratio from 2007 to 2008. The results proved that the adjustment of the deposit reserve ratio to the entire stock market, real estate board and the impact of the financial section were not fully consistent with the theory. The transmission mechanism of monetary policy was clearly time-delay. The role of central bank monetary policy in the stock market is a long-term and the role of the stock market did not achieve the desired results.