China's Monetary Policy Changes On Stock Market Prices Impact Study

National stock market is a "barometer", and it reflects all aspects of the national economy comprehensively. The monetary policy tools are the important methods of macroeconomic control. As China’s stock market continues to improve the mechanism, transmission mechanism of monetary policy through its impact on stock prices has become increasingly evident, monetary policy changes on the stock market prices in recent years has become one of the hot topics of many scholars. Interest rate policy and the statutory deposit reserve ratio of central bank policy are the important monetary policy tools. Traditional theory holds that the interest rate and the statutory deposit reserve ratio and stock price changes in the opposite direction. However, according to the Bank of China in recent years, the adjustment of the two records and the Shanghai Composite Index, most of the data deviates from the traditional theory. Therefore, it is necessary to study the effect of monetary policy changes on the stock prices. Based on the research of scholar’s both in China and abroad, I investigate the influence of the adjusting of monetary policy on stock Price and the impact of the fluctuation of stock price on real economy. First, I construct this paper’s theoretical framework through elaborating the causes of stock price fluctuation. Then, according to the selected sample data, this paper establishes a linear regression model, which respectively take the statutory reserve ratio and the deposit rate as the independent variables, the a benchmark Shanghai Composite Index as the dependent variable. Eviews software is used to do regression analysis. Then draw a conclusion of the effect of monetary policy changes on the stock prices. Based on the preceding analysis, I point out that the Central Bank of China should pay attention to the stock price fluctuation and should focus on other factors fluctuation. In the Conclusion part, I put forward several suggestions to improve the relationship between our stock price fluctuation and monetary policy.