The Research On The Influence Of The Stock Market's Development On The Transmission Mechanism Of Monetary Policy In China

The development of the stock market has changed the financial structure of one country,and then influenced the transmission and implementation of monetary policy.Since the 90s of the last century,the Central Banks and the Academia paid much attention on this problem.Though the stock market of China owns a short history,it gets a great progress.At the end of 2010,the proportion of the value of stock market in GDP is 70%.The Central Bank could hardly ignore the influence of stock market when they draw up the monetary policy.It is significant to research on the influence of the stock market's development on the transmission mechanism of monetary policy in China.The influence of the stock market on the transmission mechanism of monetary policy could be found in two respects:the first one is the role of the stock market on the transmission of the monetary policy;the second one is the influence of the stock market on the monetary policy.The role of the stock market on the transmission of the monetary policy is that the monetary policy affect the real economy through the stock market.Channels by which the stock market affect the real economy include the wealth effect,the liquidity effect,the banlance sheet effect and the Tobin Q effect.In this paper, we study the effect of stock market on the real economy in two respects,consumption an investment.We find that the stock market in China has significant and weak influence on consumption,but doesn't have significant influence on investment.We also study the influence of the stock market on the demand of money,the velocity of money and the controllability of money supply.The stock market has significant and weak influence on the demand of narrow money and the velocity of narrow money.In this paper,we study the problem in two repects and get the conclusion that the influence of the stock market in China on the the transmission mechanism of monetary policy is significant.When drawing up the monetary policy,the Central Bank should pay close attention on the stock market.However,it's not necessary for the Central Bank to put the stock market in the category of determinants of monetary policy because the stock market is still smaller than GDP.With the development of the stock market and the financial reform,the influence of the stock market on the demand of money,the velocity of money and the controllability of money supply will be significant.So the Central Bank must prepare to adjust the intermediate target of the moneytary policy.