China's Stock Market And Monetary Policy Dependencies And Then Test

In 2006, the stock market of our country ended bear market that had been maintained in the past several years. Shangzheng index rose rapidly and reached 2500, and breaks through 5000 on August 23rd, 2007. So big rise had been seldom seen in Chinese stock market which had been established for 16 years .At the same time, every big internationally stock market was also prosperous. In 2006, NASDAQ breakthrough the high spot at the time of 2000 when network science and technology foam inflated most seriously, and it achieved the highest spot of history, stock markets of many other developed and emerging market countries generally rose and broke through the historical record. In 2006, our country, stock market was prospering, and the money supply increased swiftly and violently, but CPI did not increase. The economy still maintained high speed growth, and passed safely transition-period of joining the WTO 5 years safely. This year may be regarded as the glorious year of China. But the stock index our country ascending too quickly made management layer worried universally. In the recent one year, the central bank enhanced deposit and loan interest rate four times, attempting to reduce the fund which was flowing into the stock market and keeping the stock price from foam. Seeing from the actual result, regulation function of the policy didn't appear immediately. So, is the influence of our country monetary policy to stock market too small? Does the influence lag? Or is the regulative strength insufficient? Based on these questions, the relation between monetary policy and stock market should be studied more completely and thoroughly in theory.Firstly, this article makes a brief summary to the monetary policy and stock market, and analyzes about the correlative mechanism on the monetary policy and stock market. Then it makes the theory explain to influence of each other. Secondly, using ADF test, the cointegration test, the Granger Causality tests, the vector autoregression (VAR), the vector error correction model (VECM), the impulse response function, and variance decomposition method etc. of newest of econometric technology ,it tests the relation of our country monetary policy and stock market again. Empirical analysis includes the influences of stock price to monetary demand, stock market to the speed of money flow and monetary policy transmission mechanism, interest rate to the stock market , money supply to the stock market and the bank loan to the stock market.Finally, according to the result of empirical analysis, the author thinks that there are certain interdependent effect between stock market and monetary policy in our country, but such dependent relationship is faint and unstable. The influence of the stock market to monetary policy is great, but the response of stock market to monetary policy is faint. The reason lies in that our country stock market is not standard yet, the monetary policy operation system is still not perfect, and the conductive function of monetary policy is blocked. Then according to the present operation state of our country's stock market and monetary policy, it puts forward some advice about strengthening the validity of stock market, and improving monetary policy.