The Empirical Research On The Relationship Of Money Supply And Stock Market Price

Stock market becomes up when the economy develops to a certain level.An effective stock market not only represents the level of the real economy, but also can serve as a leading indicator of macroeconomic.In a word, it is obvious that the development of the stock market has promoting effect on the macro economic growth.In recent years, the study on the relationship between monetary policy and stock price index has become increasingly hot topic in economic research.Money supply plays an important intermediary target of monetary policy in China.Therefore, research on the relationship between the stock market and money supply is significant for the right monetary policy to decrease adverse impact of share price volatility.This article consider revising roughly from theory and empirical to explore the relationship between money supply and stock market prices.The empirical analysis includes simple statistical analysis and econometric analysis.The structure of the article, at the beginning of the first chapter is to define the concept of money supply and stock market prices, stated the research status at home and abroad, and put forward in this paper, the research idea and possible innovation points. The second chapter mainly elaborates the theoretical basis of this article. In the third chapter in this paper, the status quo and characteristics of the money supply in China has carried on the simple descriptive analysis do matting for the following empirical analysis, and through the empirical analysis of measurement in the fourth chapter, after the stationarity inspection, further co-integration test, Granger causality test, and choose relatively representative variables M1, M2, and P1, through the establishment of measurement methods, such as the vector autoregression model represented by end of a month of Shanghai composite index of the stock market price and the relationship between the variables related to money supply had in-depth econometric analysis.From the descriptive analysis, on the general trend, compared our country stock price index with the difference of narrow money supply and the broad money supply growth rate have great relevance on the general trend; From the empirical research results, we found that in the long run, the Shanghai composite stock price index and multiple variable indicator of money supply exists co-integration relationship.By Granger causality test, we also surprised to find that the Shanghai composite index and the difference of narrow money supply and the broad money supply growth rate exists mutual Granger causality.This shows that our country’s stock price index has interactive relationship with the money supply.In my reference paper documentation of research results, generally considered the narrow M1 measure of money supply have greater relevance to stock price index.On the selection of variables, not only selected the three levels of the money supply, but also joined the liquidity structure of money supply more detailed indicators and multiple variables in the money supply, make econometric analysis more thorough and careful. Finally, according to the empirical research results obtained in this paper, I put forward corresponding feasible suggestions of national monetary authorities and investors.Considering the mutual influence between money supply and stock price index, the central bank’s monetary policy formulation should pay close attention to the stock market price fluctuation, and make flexible use of impact of monetary policy on the stock market for more effective regulation of the stock market.For stock market investors, they should actively take the initiative to learn the related basic knowledge of securities investment, to provide their own investment decisions relative professional analysis, and grasp the market trends, to gain more benefits. At the same time, the operation of the stock market needs further specification.The role of monetary policy transmission mechanism of stock market needs to be improved to make the conducting function of the stock market to achieve the goals of monetary policy in our country even play a more active role.Due to my limited time and energy, factors influencing stock prices not be included in the subjects,and there is not a judgment about the relationship between money supply and stock market prices with specific parameters. In future studies, I will have more factors which influence the stock prices included in the study. Also I will take more methods and models to make up the lack of text.