The Empirical Analysis Of Chinese Stock Market's Impact On Monetary Policy Implementation

The role of capital market is more and more important along with the increase of economic strength in our country. Chinese stock market's history is just only twenty years, but its importance is more and more concerned, and the role of economic barometer is more and more perfected. After the economic rapid growth in 2007, and the world economic crisis in 2008, the roller-coaster style track of stock market gives people a deep impression. The stock market is gradually entering the policy-maker's perspective, and the government has taken many measures to maintain the healthy and stable development of the stock market when the stock market declined seriously. The stock market is becoming increasingly important, and the regulation has become stringent. The government has taken some measures to restrict the credit funds into the stock market.This paper mainly studies the impact of Chinese stock market on the monetary policy. The Shanghai Stock trading volume represents the Stock Market. The monetary policy includes the intermediate target of monetary policy, ultimate objective of monetary policy, monetary police transmission mechanism and monetary policy tools. This paper uses popular econometric model such as Unit Root Test. Cointegration Test. ECM,VAR,Granger Causality Test and Impulse response analysis by analysing the data from the first quarter of 2002 to the first quarter of 2009. The result shows that the stock market has very strong impact on M1 and M2. Under the influence of the stock market, more and more money changes from static savings to dynamic currency. The currency will flow into the stock market when the stock market is boom, but the currency will not change to saving money when the stock market is depressed. This will cause the increase of the money supply. The result of the influence on the ultimate objectives of monetary policy is that Chinese stock market role in promoting economic growth is very small at present, and even negative effect in the long term. The main reason is Chinese stock market is still relatively incomplete, the market rate is low, the resource allocation function of market is weak, and there is not suitable mechanism to guide the rational flow of funds. The result of the influence on monetary policy transmission mechanism is that this mechanism is not impeccable and clear. This paper mainly studied the impact of Chinese stock market on credit scale, because the credit channel is the main channel of monetary police transmission mechanism. The credit scale expansion is a leading cause of the stock market expansion, but not the other way. At present, Chinese stock market has a very small short-term impact on credit scale, and the impact is negative in the long term. The credit scale has a very big impact on stock market, and we should strengthen supervise to prevent the credit funds into the stock market and bringing about bubble of stock market.