Research On The Impact Of Stock Price On The Effectiveness Of Intermediate Target Of Monetary Policy

The effectiveness of Intermediate target of monetary policy is reflected in its regulation on the ultimate objective of monetary policy.The stock price impacts on the ultimate goal of monetary policy,the output and inflation,which causes the implementation of monetary policy not up to the expected results,finally affects the effectiveness of Intermediate target of monetary policy.On the basis of theoretical analysis,this paper quantifies the reaction mechanism of monetary policy,so as to clarify the extent of the impact of stock price on the effectiveness of the intermediary target.Firstly,this paper expounds the theoretical basis of different monetary policy intermediary targets,including the transmission mechanism and the relationship with stock price.Secondly,it analyzes how stock price affects the effectiveness of the intermediate index,discussing the transmission path of the stock market,including the wealth effect,inflation effect,Tobin Q theory and liquidity effect.Then the paper analyzes the actuality of the stock market of our country,the relationship of stock price and economic development goals as well as the relationship between the intermediate target and the economic development goal.In the empirical analysis,the correlation and regression analysis clarify the stock price has no significant influence on the final target of monetary policy.Then,construct an IS-Phillips model of closed economic environment,considering the demand function,inflation equation,asset price equation.By minimizing the central bank loss function,find the optimal money supply function and the optimal interest rate function which is included price factors or do not contain the price factors.Employing the two-stage least squares method gets the optimal monetary policy reaction function.Through parameter setting and simulation,the results show that the effects of the stock price on the intermediary targets are related to the central bank's objective function:(1)when the central bank pegged the inflation target,the stock price will help the actual output to match the expected value,so as to enhance the effectiveness of intermediary index;(2)when the central bank's monetary policy target is both inflation and output gap stability,price factors will lead to more controllable inflation,thus reducing the effectiveness of intermediate indicator.Furthermore,comparison of interest rate and money supply,money supply is better at controlling the inflation and the interest rate controls the output gap better.Take account of the current dual goals of monetary policy,the interest rate is more effective than the money supply,which leads to a smaller central bank loss.Our monetary policy should not respond to stock price.Finally,based on the above conclusions,we put forward policy recommendations on the choice of monetary policy intermediary targets,how monetary policy responds to asset price and stock market development.