The Research On Intermediate Indicators Of Monetary Policy Effect To Stock Market

Since the1990s, the Shanghai stock exchange and Shenzhen stock exchange has established, showing that Chinese stock market access standard operation stage. After more than20years development, Chinese stock market has become one of the fastest growing securities market. But, comparing with the developed countries’stock market, the stock market in China still has some unavoidable defect, one of which is larger fluctuation. The moderate fluctuation is helpful to improve the activity of stock market, but excessive abnormal fluctuation will reduce the efficiency and weaken the asset allocation function of stock market. Therefore, the study on the main factors which cause the stock market’s fluctuation is of significance to strengthen the Chinese stock market system construction and standardized the management.Throughout of the history, monetary policy has important influence on the trend of the stock market. Although the monetary policy adjustment is not aimed at the stock market, but the central bank’s operations on the monetary policy, even the expectations of the stock market investors for future operations of monetary policy, will lead to the stock market’s fluctuation. Therefore, the study on the monetary policies’influence to the stock market’s fluctuations has the important meaning.In practice, there is a long delay in the monetary policy operation from the beginning to the end. And monetary policy intermediate indicator such as money supply, interest rates can not only completely response the monetary policy intention, but also ensure that the investors can effectively observe the monetary policy operation and the policy makers can make the adjustment according to the control effect. Therefore, this paper selects the monetary policy intermediate indicator as the observation of monetary policy, so as to further exploration monetary policy effects of the stock market. At the same time, this also can make the research conclusion been of more practical value.Based on the above considerations, this paper chooses the money supply and interest rates as the representative of the monetary policy intermediate indicators, and respectively uses the theoretical analysis and empirical analysis to study this topic. This paper is divided into four chapters, and the main contents are as follows:The first chapter is the introduction.This chapter first introduces the characteristics of Chinese stock market’s fluctuation and the influence of the monetary policy on stock market, and takes it as the background which shows that the study on the influence of monetary policy on the stock market of significance. Second, this chapter defined the concept of the monetary policy, monetary policy intermediate indicator and the stock market fluctuation etc. And then this chapter explains the reason to choose the money supply and interest rates as intermediate indicators of monetary policy and why to select the Shanghai composite index as observed object. Third, this chapter reviewed the Chinese and foreign theory in research of money supply and interest rate. Finally, this chapter puts forward the innovation and the insufficiency.The second chapter is the theoretical analysis and the hypothesis.This chapter is mainly theoretical analysis about stock market fluctuation which is caused by money supply or interest rate. According to the theoretical analysis conclusion, this chapter proposes the research hypotheses, to be the direction of empirical analysis. First, this chapter reviews the history about money supply which is selected as the intermediate indicator of monetary policy, then, investigates the fluctuation of stock market which is changed by money supply. If the money supply is changed by implementation of monetary policy, the price level, the liquidity and the portfolio selection will change at same time. And the unexpected change of money supply will take especially impact on stock market, which make stock market fluctuation abnormally. Changes on interest rate also effect stock market fluctuation, which caused by changing the balance between aggregate supply and aggregate demand, changing financing costs of enterprise, and changing investors expect. Stock market fluctuation is changed by interest rate not only for above reasons, but also for effect of investment substitution.According to the theoretical analysis, this chapter brings forward four research hypotheses, that is, money supply (M0, M1and M2) and interest rate change will effect stock market fluctuations.The third chapter is the empirical analysis.This chapter studies intermediate indicators of monetary policy influence on the stock market fluctuation through empirical research. This chapter mainly takes the money supply (M0, M1and M2), interest rate (interbank loan interest rate), and stock index (the Shanghai composite index) target as observation, respectively study the money supply and interest rate effect on the stock market fluctuations, through the ADF unit root test, granger causality test, the foundation of VAR model and observation impulse response function diagram. From the test, M2can’t be confirmed to be the reason of Shanghai composite index changes by granger causality test, and therefore were removed from observed object. At last, the conclusion of empirical analysis comes from observation of impulse response function diagram, according to the variation trend and interval of graphics, which explain the economic meaning of VAR model.The fourth chapter is the conclusion and recommendation.The main conclusion is:①In our country, M0, M1and interest rate variation are of significant correlation with the stock market fluctuation.②It exists time lag when M1and interest rate effect the stock market fluctuation, and the time lag of stock market fluctuation effected by interest rate is much longer.③There is speculation in Chinese stock market.From above conclusions, this paper provides suggestions as follows:①Central bank should concern the operation of monetary policy effects on the stock market;②Investor can forecast stock market fluctuation based on M1and interest rate;③The time lag between operations of monetary policy and the stock market fluctuation should be decreased:④Securities company should emphasize the importance of investors education.