The Impacts Analysis Of Monetary Policy Adjustment On Stock Market Liquidity From The Angle Of Intermediate Target

Over the years, the influence of monetary policy on stock market has been the focus of both market and academic discussions. However, those discussions are mostly concentrated on the influence of monetary policy on the market return and share prices. When the financial crisis happened in 2008, the global financial market was out of order since the stock market liquidity suddenly weakened. Since then, people began to become more aware of the importance of stock market liquidity. In China, monetary authorities tend to adjust macroeconomic and financial market through monetary policy adjustments. Therefore, it will have significance to explore the impact of monetary policy on the stock market liquidity, and analyze its asymmetric influence in different market conditions.From both theoretical and empirical perspective, the paper analyzes the monetary policy intermediate target. First of all, this article introduces the concepts of monetary policy and stock market liquidity, and summaries the impact mechanism of monetary policy on stock market liquidity. Subsequently, using Shanghai A shares as sample, the article uses Granger causality test, VAR model, impulse response analysis and variance decomposition to do the empirical test. The empirical results show that the money supply M1, M2 and interest rates will have some impact on stock market liquidity, and the impacts of M2 and seven days between the interbank rate become more apparent. Other control variables such as market return will also have a great impact on stock market liquidity. The results of MS-VAR model test on the asymmetry of monetary policy on the stock market liquidity show that: Under different market conditions, there are differences of monetary policy intermediate target on the stock market liquidity, and the differences are mainly reflected in the impact strength. In general, the impacts of monetary policy on the stock market liquidity are strongest when the market is active and are relatively low in a market downturn. The impact of money supply is greater than the impact of interest rates. Finally, according to the empirical results, this paper makes related recommendations on monetary policy operations and healthy development of the stock market.