On International Relationship Of Monetary Policy And Asset Price

As an important part of the financial industry,China’s stock market has grownfor a few years,2010the stock market value already accounts for66.41%of GDP. Thestock market has already effected macro-economy more and more through theconsumption, investment channel ect.. The macro-economy is external environmentof making monetary policy, so the stock market will influence on the monetary policy.In addition, the implementation of monetary policy will impact on the stock market.Therefore, researching on the interactive relationship between stock market andmonetary policy has the great significance.It is not only directly related to theinvestors’ own interests, but also related to weather the monetary authoritty is able tointervene in the stock market and the stock market whether should be taken intoaccount monetary policy in the future.First of all, the paper theoretically combed the relationship between stock marketand monetary policy. There are two points to discuss: one is the effect of monetarypolicy on the stock market, mainly from interest rate and currency supply twoperspective,and another is the influence of stock market to monetary policy, mainlyfrom the indirect effects (stock market on macroeconomic effects) and directinfluence (currency demand and its velocity) to discuss. Secondly, This paperempirically analyses the relationship between them. This paper uses the January2005to December2010monthly data and selects four variables: the inflation rate, theactual output, monetary policy and stock price, establishing the SVAR model, andusing the impulse response and variance decomposition method,finally analyzing therelation between the monetary policy and stock market relationship.According to empirical analysis, we found that: firstly, on the view of theindirect effect, the stock market influence on price level negligibly (1.5%), and on thereal economy finitely too (6.0%). Secondly, on the view of the directly influence,although the stock market has influence the money supply to a certain level (11.36%),but it is still lower than the price level. Thirdly, the entity economy and the price level to the influence to the stock market is not obvious, but money supply play anremarktable impact on the stock market. Therefore, in the stock market is not verysignificant influence to monetary policy, I think that the central bank is not suitablefor pegged to the stock market. But along with the stock market develops, thecontinuous improvement of the system, the stock market will have more and moreremarkable influence on the monetary policy formulation, and it will be one of thegoals of the monetary policy.