The Impact Of Monetary Policy On Stock Prices

With the development of Chinese stock market,particularly with the trend of the globalization and the integration since the 90 years,the stock market as a regulatory intermediary of the monetary policy,it becomes much important.Monetary policy as a monetary policy instruments of the monetary authorities,will have impact on the stock market inevitably,and cause stock prices to change.So,along with the relationship between monetary policy and stock prices increasing,the monetary authorities must take full account of the implementation of monetary policy shocks on the stock market when enacting and executing of monetary policy. For this consideration, this article of the impact of monetary policy on stock prices has a strong practical significance.Innovation of this article is that it review and analysis a complete economic cycle,this full cycle is divided into four different phases,then recalled the four stages of macro-economic situation, monetary policy operations,the effects of monetary policy and its impact on stock prices respectively.Firstly,this paper reviews chinese monetary policy after the Asian financial crisis, and focused on the impact on the stock price.However, merely theoretical analysis is not enough.So, next this article make use of econometric models,select representative variables, combined with chinese actual financial data to study respectively the effect of money supply and interest rates on stock prices.The empirical results show that the effect of money supply and interest rates on stock prices is not as obvious as theory. Specifically, the interest rates can not achieve the policy adjustments to the stock price initially,but two months after the interest rates adjustments, the stock market began to react, and the effect will continue a long time.This indicate that the impact of interest rates on stock prices has a two-month delay, after that the impact of the interest rates on the stock market is significant. In comparison, the interest rates has much stronger effect on stock price than money supply. From the empirical results, money supply and the stock prices do not exist conintegration relationship on the long-run. This shows that the transmission mechanism between Chinese monetary policy and the stock market is not yet sound and the monetary policy transmission in the stock market exists delay and obstacle.Then, based on the empirical test results, this paper studies the inefficient reasons of the monetary policy in stages. Finally,, in order to supply some referential advicese,this artical put forward several recommendations about how to enhance the effectiveness of monetary policy, control the stock price down and improve the effectiveness of the stock market. based on the current economic situation.