Empirical Study Of Monetary Transmission Mechanism Of The Stock Market In China

With the continuous improvement of Chinese financial system, securities investments market began to play an increasingly important role and influenced our national economy profoundly day by day. Many countries have experienced the serious harmful effects the stock price volatility brings. Therefore, the research on monetary transmission mechanism of Chinese stock market based on our own reality is very urgent and meaningful.In this paper, we first describe the structure of the whole paper and then give the explanation of the monetary policy used in recent two decades, which is divided into three different parts depending on the time and characteristics.Second, we review and analyze the theories of the monetary transmission mechanism. On this basis, in order to elaborate on how monetary policy affects the real economy through the stock market, we introduce the theory and recent empirical research in the stock market-related monetary transmission mechanism in detail, including foreign and domestic.Third, based on our own reality, we separate our empirical analysis into two parts:one is how monetary policy influences stock market; the other is whether the volatility of the stock market should be taken into account in the formulation of monetary policy. We creatively choose representative variables——the money supply, the interbank interest rates and the national repurchase bond rate, to study Chinese stock market reaction to monetary transmission mechanism. In each section, we sum up the corresponding empirical conclusions and give some economic interpretation.In the last part of our paper, we conclude:monetary policy can influence stock market efficiently, and stock market can be a very important factor which should be considered while making monetary policy.From the conclusion, we discuss the economic reasons of the results occurred. That information is not symmetry enough but is as important as the imperfect of the finance market. They all restrict the efficiency of the monetary transmission mechanism on the stock market.Finally, in the analysis of existing problems, we give advices to improve and perfect the monetary transmission mechanism, and some views of the stock market in order to enhance the efficiency of monetary policy transmission mechanism.In this paper, the main contribution and innovation are:1. Compared to the previous domestic literature, we use two variables with higher degree of market than benchmark interest rate. On this basis, we research the relationship between monetary policy and stock market.2. Since Chinese lack of economic data, the data used in the past is very limited; this affects the efficiency of the real situation. We creatively choose interbank offered rate and national repurchase bonds rate to ensure the continuity of the data.3. We use a more convenient way to examine the role of stock market conditions on the real economy, which provides a new method of this problem.During the process of researching, there are some flaws. We may ignore some important variables which can affect the stock market. And also, the lack of statistical knowledge may cause inaccurate results. This can be perfected in the future.