| With the Shanghai Stock Exchange and Shenzhen Stock Exchange have been established since the1990s, China’s stock market has grown rapidly and play an important role in the national economy, the development of the stock market changed the functions of monetary policy. Although many countries’ central banks have successfully controlled the inflation, but still feel difficult for asset price inflation including stock prices inflation. There are more and more challenges for traditional monetary policy transmission mechanism. So it’s urgent to research the transmission effects of the stock price to monetary policy in order to prevent the negative impact, basing on our country’s current situation.This paper first analyzes the theory of the transmission effects of the stock price to monetary policy, followed by a profound analysis of the evolution of China’s monetary policy transmission mechanism, the development and changes of China’s monetary policy and the real economy’s situation.Then, the stock price transmission mechanism is divided into two aspects:the impact of monetary policy on stock prices and stock prices on the real economy. Taking empirical analysis to analyze the impact of money supply and interest rate on stock prices, and how stock prices affect the ’consumption and investment. Coming to the conclusion that the money supply has a long-term stable relationship with stock prices, but interest rate doesn’t. The stock market has positive effect on consumption and investment, but the effects are relatively weak.Finally, putting forward a few suggestions for improving the transmission effects of the stock price to monetary policy. Including improving the resource allocation function of the stock market, establishing the joint mechanism of the currency and stock markets, promoting market-oriented reform of interest rates, improving the system of monetary policy operation, expanding the stock market size and adjusting the stock market’s structure. |
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