Research On The Influence To The Monetary Policy By The Development Of Stock Market In China

As the stock market develops, the connection between macroeconomic and stock market becomes closer. The impact of stock market on monetary policy is more evident, the traditional system of monetary policy is facing more and more challenges. Based on the review of the relevant theories and researches, this paper explains the general impact mechanism of stock market development on the monetary policy and studies influence of the development of China's stock market on the monetary policy from normative and empirical aspects. This paper finds that because of the development of China's stock market, the amount and structure of monetary demand changes and the wealth effect and investment effect are promising gradually. This paper argues that China's monetary policy should react to price fluctuations of the stock market properly, the central bank may adopt the flexible inflation targeting.