China's Money Market And Capital Market Coupling Mechanism Of Empirical Research

The economic operating practice of all countries across the world shows that a higher operating efficiency of financial market is not only conducive to realize faster growth of an economy, but also conducive to promote welfare level of its residents. To enhance operating efficiency of financial market, we need to rapidly enlarge the scale of it on one side, and continually optimize the structure of it on the other side. Follow the idea enhancing the operating efficiency of it by way of optimizing structure of it, a research on its segmentation problem because of imperfect coupling mechanism between money market and capital market is very necessary. Considering 2000 as a threshold, a series of policies and regulations has been issued in order to broaden the linkage channels between them, and also to reinforce coupling capability between them. This indicates that our government begins to pay attention to perfect the coupling mechanism between them. Therefore, a research which discusses the coupling mechanism between China's money market and capital market is of great theoretical and practical significance.Based on theory of financial development and relevant researches of domestic and foreign, this paper analyses the coupling mechanism between them and establishes a coupling mechanism theoretical model, added into transaction cost, and it also probes into inherent force which brings capital flowage in order to demonstrate necessity of establishing coupling mechanism in China. In empirical part, we choose daily price and trading amount of inter-bank bond repo market, lending market and stock market as analyzing variables, and also use econometric methods of Granger Causality test, Expanded Vector Autoregressive model, Generalized Impulse Response Function to test price coupling mechanism between money market and capital market in China. The testing results show that closely coupling mechanism between money market and capital market in China hasn't yet been established. In a short time, the decline of money market interest rates will bring the rise of stock market price. There also exists linkage relationship that the rise of stock market price accompanys with the rise of money market interest rates, but its Granger Casualty relationship is't significant. In the end, based on above-mentioned study, we give policy recommendations such as perfecting relevant financial regulatory laws so as to timely propose mixed manage of financial industry, continually developing and perfecting bond market so as to broaden linking channels between money market and capital market, development of bond market, reducing the entrance constraints between money market and capital so as to strengthen the connectivity of investors between money market and capital market.