The Study On The Capital Market Conduction Effect Of China’s Monetary Policy

From the late1980s to the early1990s, Chinese Capital Market has been established for over twenty years. The development of Chinese Capital Market is relatively large, only in2012, the size of the stock market financing have reached6.5trillion yuan, bond market have reached a circulation of5.8trillion yuan. Capital markets had achieved such a large scale that its market functions such as the resources allocation,asset pricing, the price signal transduction, gradually play a role in economic life. Due to the development of capital markets, The unpredictable nature of the demand for money increased, and money supply is no longer reflect the true demand for money, coupled with sensitive reaction of the capital markets to monetary policy changes, making the central bank had to consider the effects of the monetary policy transmission. Domestic and foreign scholars have studied the pathway of monetary policy in the capital market is divided into two processes:the first process is monetary policy affect the capital markets, changes in asset prices through monetary intermediate target (interest rates, money supply); second process is capital market asset price changes affect the output of the real economy.This article first analyzes the current development of Chinese Capital Market and its impact on monetary policy and the monetary policy transmission process,then through the empirical analysis to test if China’s monetary policy’s conduction process patency during the processes,and then analysis of the reasons.Empirical analyzes were performed using the the ADF test method, the Johason cointegration test law, Granger causality test, variance decomposition and vector error correction model. The conclusion is:The first session: monetary policy through interest rates affect the stock price is smooth and effective, and the pathway to affect bond prices is not smooth and invalid; Money supply (M1) is the Granger cause of the inflation rate,The pathway of monetary policy by influencing the rate of inflation affecting the stock price is clear, effective.,but bond prices is not smooth and invalid.This shows that the transmission of monetary policy in the stock market is effective,in the bond market is invalid. Second session:Stock market and the bond market is not the cause of consumer spending Granger, this means that is capital market does not have a consumption effect.The stock market and bond market are the Granger cause of investment in fixed assets.From the veiw of the establishment of the vector error correction model,the influence coefficient of the stock market and the bond market to investment in fixed assets is smaller and is negative.show that the capital market has a weak effect on investment but negative effect.in other words,it is inhibit the output of the development of capital markets on the real economy.Overall, the effect of the conduction of monetary policy in the capital market is not particularly desirable.In the stock market,it is effective in the first process and in the second process it is no consumption effect, but have negative investment effect;In the bond market,it is ineffective in the first process and in the second process it is no consumption effect, but have negative investment effect;From the financing of two markets,its have reached a vert high level,but its has little effect on the real economy output.This show that there are some flaws exist in two market. This paper through analyzes them to find out the cause, and gives the corresponding policy recommendations.