An Empirical Study Of The Impact Of The Money Supply To The Stock Prices In China

In recent years, the development of China’s stock market is faster and faster, in influence in the financial market is also bigger and bigger. Since the implementation of reform of the non-tradable shares in1995, the perfect degree of the stock market is also rising, but the actual conditions of our economic and foreign developed countries still have gaps. A perfect stock market, not only can promote the development of economy to make the full employment of the national income be realized, but also can improve the country’s influence in the international, increase the country’s voice. These advantages enough to let us increase the study of the influence on the stock market factors.The economic intervention of our country can be realized by the fiscal policy and monetary policy, and the monetary policy is the main control measures. In the monetary policy, the money supply is easy to adjust and control is the, therefore, the money supply at home and abroad to the stock price effects caused great importance. Scholars through various pathways analysis the mechanism which can affect the stock market, interest rates conduction, investment combination effect, psychological way such as expected are the main ways. The integrated use of the macroeconomic regulation of the money supply and the stock price has an important influence for economic development.Study of money supply to the stock price’s influence has great significance on economic development. In developed countries, the stock market is taken as a reflection of economic barometer, but there are still a lot of problems in our country, we cannot make full use of the stock market, study money supply effects on stock prices can make a better understanding between the two transmission mechanisms, and control the economic development to achieve the goal of our country. In general, the change of the central bank’s monetary policy which through the money supply’s change, the stock market also can produce corresponding change, the fluctuation of the stock market will affect the investment, resulting in economic fluctuation of the other. So in such an interconnected chain, study money supply to what extent the impact of the stock market is very necessary. This article is expected to provide some useful suggestions through solving the problem of money supply to the stock price influence.This paper first describes the theoretical foundation of the stock price influence. Discuss the mutual relationship between money supply and stock price. After the qualitative analysis on the money supply and stock market, the Shanghai index, monetary supply, industrial added value, interest rate and inflation rate index will be combined in the paper, using SVAR model to analysis the variable interactions, and focuses on the results of impulse response. According to the collection of the aging significance data, the money supply by descriptive statistical will be discussed, and then establish an econometric model, from the money supply to stock price, the Shanghai index, money supply, interest rates, the industrial added value, inflation rate as economic variables will be considered into SVAR model, then discussed the long-term interaction and mutual influence of the money supply and the stock price. The empirical research shows that when this period to M2has a positive impact, the broad money supply increased, the Shanghai index began to rise, then fell, and finally tends to equilibrium. Shows that the stock price will change after the broad money supply’s influence through a series of transmission mechanism, and then the impact tend to be stable. At last, it puts forward some suggestions for reference.The innovation of this paper is the use of timeliness data, the Shanghai index, money supply, industrial added value, inflation rates, interest rates and other indicators are included in the model, and make index data to make the data more adaptability. This paper will be incorporated into the model variables not only exogenous variables, there are endogenous variables; not only consider a current inside unripe variable on other endogenous variable hysteresis effect, also taking into account the current among endogenous variables influence. In this background I will use a more suitable model called SVAR.The limitation of this paper depends mainly on the issue of the static analysis, did not consider the data’s order which impacts the stock maket. In fact, in the progressing of the impact of the money supply to the Chinese stock price, various variables play different roles, but the paper did not consider dynamic analysis, instead of that, all variables together into the model analysis.