Transformation Of Chinese Monetary Policy In The Capital Market Evolution

Under capital market globalization background, although the world major country's inflation is under active control, the world financial market, specially the stock market actually has sufferred huge fluctuation of inflation and contraction one after another. How did various countries' policy authority deal with the development of capital market? The policy authorityies do not have the brilliant plan painstakingly, and they always fall into a dilemma. On the one hand, they fear that policy behavior will pierce the froth and create such economic recession as Japan; On the other hand, they worried that the policy behavior will make the froth increase sharply, and it will create a bigger hidden danger to economy.After nearly 20 years' development, China's stock market expands further in breadth and depth, but the stock price also had fluctuated frequently and largely. Because China's financial system especially the bank system is not steady at present, non-fundamental plane fluctuation of the stock price will possibly have a more tremendous potential impact on economy. Therefore, the development of capital market has become an important factor that the Central Bank has to consider when it formulated and executed monetary policy.For a long time, the credit policy in China is the main content of monetary policy. With the promotion of currency market and the market-oriented interest rate, the importance of interest rate channel in the monetary policy transmission is growing. However, there are still many problems in credit and interest rate channels. They mainly display that density of the financial organ is quite low and its structure is unreasonable; the state-owned commercial bank reduce credit and local financial institutions develop slowly; credit funds are concentrate too much.; there is double asymmetric between demand for credit and credit availability of business and consumers. Recently, the competition between capital market and money market is strengthened gradually; capital markets are expanded; the money market and the capital market are integrated gradually. Obviously, the property price effect of monetary policy conduction is strengthening. The rapid development of China's capital market leads to that the financial structure has undergone profound changes and a direct impact on ultimate objective and intermediary target of monetary policy, monetary policy instruments as well as the monetary policy transmission mechanism and so on , which put forward a great challenge to the current monetary policy framework.Empirical study of capital market conduction mechanism of China's monetary policy indicated that the Central Bank's monetary policy can affect capital markets in the process of Central Bank's monetary policy to capital market's conduction. However, the most important factor comes from stock market's own inertia (for example, non-rational behavior of stock market participants, psychology anticipated as well as the system of low efficiency supervision and so on). Obviously, the Central Bank cannot effectively control the stock market. Even when the Central Bank has sought to influence the stock market, it's better to choose the intermediate target of interest rates than money supply. Granger causality relation test indicated that in the conduction process of the capital market to monetary policy's goal, changes of capital market affect consumption and investment, and also have an impact on national income through Tobin Q theory, wealth effect, asymmetrical information effect, fluid effect, anticipated effect and other ways .However, this transmission mechanism did not play a role in China.According to the results of empirical analysis, we propose policy proposals. They are included that monetary policy should ensure stability of the financial system, intermediate target of monetary policy should re-established, monetary policy should maintain a certain degree of transparency, monetary policy tools should be innovated and so on..