Study On The Relevance And Coordination Of The Main Stock Markets And The Monetary Markets

Based on the competitive financial system, China has to improve and make its financialsystem stronger. Because of the special conditions and the historical reasons, China haspracticed a series of policies, such as “develop the capital market firstly and the monetarymarket lately”, which leads the isolation of the stock market and the monetary market. Withthe special policy background, the study on the relationship of the stock market and themonetary market has a great theoretical and practical significance.This paper adopts a series of empirical methods to measure the linkage of the stockmarket and the monetary market from the perspective of the macro and micro, static anddynamic, short-term and long-term. It studies the relation of the rates of the monetary marketand the stock price, and gets the conclusion that the linkage between the money market andthe stock market, with the features of time-lag and asymmetry, enhances slightly.It uses the same empirical methods to measure the linkage of the stock market and themonetary market in America, Japan and China. The study indicates that the relevance of thethree monetary markets is not significant, and the relevance of the three stock markets isobvious. From the aspect of the linkage of the stock market and the monetary market,America performs the best, and Japan is ahead of China, the order is also applied to the abilityof obtain the information of the three financial systems. The condition has a relation with thedevelopment and the characteristic of the three different financial markets.This paper also builds a simple indicator system to analyses the coordination of the stockmarket and the monetary market, they are economic adaption indicator, scale matchingindicator, market linkage indicator and function developing indicator. Compared to Americaand Japan, the coordination of the narrow monetary market and the economics the lowest, butthe coordination of the generally monetary market and the economic is the best, it is becausethe big scale of the bank loans in China. The coordination of the stock market and theeconomic is the worst of the three countries. Meanwhile, the coordination of the stock marketand the monetary market is weak, compared with stock market, the monetary market in Chinahas the features that the narrow monetary market is lagging with a small scale while thegenerally monetary market develops advanced with a bigger scale. The linkage of the stockmarket and the monetary market in China is weak, and the financial system in China do notdevelop its basic function well.Based on these conclusions, this paper gives some advices that increasing the kinds of the short-term financial tools in the monetary market, introduction the institutional investorssuch as the monetary market funds, reducing the intervention of the government aimed at thestock market.