Empirical Analysis About The Influence Of The Deposit Reserve Policy Adjustment On The Chinese Stock Market

With the deepening of economic globalization and the rapid developmentof financial innovation, the role of countries’ stock market has strengthenedgradually in the national real economy. The late-started China’s stock markethas developed rapidly in recent years, however rose off the extremephenomenon, which had a negative impact on the stability of China’s financialsector and the healthy development of the real economy. Although the stockmarket brought positive effect to the monetary policy transmission, it alsobrought great challenges to the effect of the implementation of the policy. Theauthorities while making monetary policy need to consider very carefullyabout the impact to the stock market, and make the rational policies. China’scentral bank has launched monetary policy for the stock market several times,but the results are often less than ideal, still have doubts about theeffectiveness of policies.Deposit reserve policy is one of the three conventional tools of monetarypolicy. It plays an important role for achieving goals in monetary policy and guarantee the macroeconomic operation. Especially in recent years, thePeople’s Bank of China launched the deposit reserve policy several times tointervene in the market economy. This inevitably causes consequences inChina’s stock market. The majority of investors urgently concern about whatmanner and how deep the impact will be. As a result, the study of how thechanges on deposit reserve policy effect on the stock market is particularlymeaningful.In the article, the analysis is divided into two parts: Firstly, we use thequantitative research methods-vector model VAR to analyze the relationshipbetween the statutory deposit reserve ratio and the long-term relationship withthe Shanghai Composite Index. The result is that the deposit reserve ratio andthe Shanghai Composite Index has a long-term stable relationship, and therelationship is a negative correlation. The central bank deposit reserve policywill not have a big impact on the stock market in a short period of time, butwill result in cumulative lag effect in the longer term. Secondly, We use thebasic idea of the event analysis method to study the short-term effect on thestock market on adjustment from the statutory deposit reserve ratio. We found that the deposit reserve policy has declared effect, and the same policy willhave different effects if it adjusts in a different economic situation. While itstill differs in the same economic situation but with different policiesdirection.According to the study, the impact of China’s deposit reserve policy onthe stock market did not achieve the desired results for many reasons. Thispaper analyzes the transmitted ways from the deposit reserve policy, the stockmarket as well as policy to the stock market. In order to improve theeffectiveness of the implementation of the policy, we also show somerecommendations on strengthen the effectiveness of the policies according tothe problems mentioned earlier...