Monetary Policy Tools To Manipulate The Stock Price Impact Of Empirical Research

The price of financial assets, which is determined by economic activities of all market participants, is the most important signal to distribute economy resource in efficient capital markets. Also, it is able to response for most possible information affecting assets' revenue. Instruments of monetary policy, which functioned as the strategy and means by the authorities to implement their policy, will has no doubts to bring profound influences to capital market, and eventually cause the change of the price of financial assets.At present, the adjusting of monetary policy in China is mainly dependent on direct instruments. Operating instruments of monetary policy, on the one hand, will affect the medial targets such as monetary supply and interest rate, and then influence the capital flow and the relationship of supply and demand in the market. On the other hand, the change of benchmark rate or required reserve ratio may bring a policy signal to capital market and alter both of the anticipation and decision of market participants. Finally, these effects will be reflected as long-term influence and short-term impact of instruments of monetary policy to the price of financial assets.Three instruments of monetary policy, benchmark interest rate, required reserve ratio and open market operation are analyzed in the thesis. Based on the analyzing of the statistical characters of Shanghai index and the influence mechanism of each instrument, this paper builds VEC and GARCH-M model, uses impulse response and event study technique, to discuss the reaction of stock market to monetary policy operation from three aspects including long-term effect, short-term event effect and the difference between industries.According to the result of empirical study, there are differences between the effects of which different instrument influence stock price. Adjusting benchmark rate or required reserve ratio is likely to affect the fluctuation of stock price, however it is uncertain. It has little substantive effect on the stock price for current policy operation. Owing to deficiency and limitation of market size, variety, term structure and operating target, open market operation has not operated an effective function on stock price. The reaction of industry stock price to the operation of monetary policy is relative to capital structure and firm character of each industry. Several pieces of advice are made in the last part of the paper, which are concerning to how to enhance the monetary policy force, play down stock price and improve the efficiency of stock market.