The Research On The "Barometer" Effect Of Chinese Stock Market Under The Time-Varying Framework

After more than 20 years of history, our stock market is becoming more and more mature, and it has been an important platform of China to optimize the configuration of financial capital and to provide direct financing for enterprises. So, it has become an indispensable part of national capital market and macroeconomic development. The relationship among the development of stock market and monetary policy fundamentals and macroeconomic fundamentals has increasingly become the focus of many scholars’ research. And one of hot issues is the "barometer" effect of stock market (i.e., whether the volatility of the stock market can make signal of macroeconomic development and changes). If the "barometer" effect can be confirmed and be taken advantage of. this will undoubtedly become the important reference indexes of trend of China’s economic operation, which are beneficial to the healthy development of Chinese stock market.In 2008, when it was financial crisis, although in different countries the changes of the stock market trend were basically consistent with the country’s economic operation trajectory, their stock market "barometer" effects had different performance because of the different internal mechanism of the stock markets and the law of development in all countries. To explore the existence and time-varying characteristics of the "barometer" effect that stock market brings on the macro economy, the time-varying TVP-VAR model has been constructed from the perspective of the currency fundamentals and macroeconomic fundamentals to respectively reflect the relation between stock price, GDP and inflation, and the relation between stock price, RMB exchange rate and market interest rates. Consequently, the empirical results reveal that in the Chinese market environment, the mechanism that monetary policy impacts the stock market by regulating the interest rate and exchange rate, and then stock price affects the operation of macro economy is found to be effective. However, the performance of Chinese stock market’s "barometer" effect on macroeconomic fundamentals is less ideal than the adverse effect of the latter to the former. Therefore, in order to attract long-term investors and to stabilize the market, Chinese government should not only pay attention to the healthy development of macroeconomic indicators, but also to the linkage effect between multiple markets, the stability of financial markets and the enterprises with substantial innovation progress during the process of the construction of Chinese stock market.